These are 8 proven Ways that can help to reduce debtor days:
- Update your Terms and Conditions
Your Terms and Conditions should clearly state your payment terms. Standard commercial terms are 30 days and we recommend that you think carefully before increasing them. You should get existing clients to agree to and sign your new terms and conditions.
If you are supplying products, it is important that your Terms and Conditions include a clause stating that you continue to own the goods until you have been paid in full.
2. Know Your Clients
It is important that you do your research on new clients. You must know:
- Their name- some businesses don’t know the correct name of the companies they supply
- Their trading entity- e.g. sole trader, partnership or a limited company
- Their correct address
You need this basic information if you need to take them to Court for non-payment.
You should also know their credit rating and set appropriate limits. You might want to ask for money on account or personal guarantees in some cases.
3. Ensure You are Invoicing Correctly
You need to find out:
- If you need a Purchase Order number on your invoice. Many companies require this and will not pay your invoice without one.
- Where to send your invoice. Many companies mistakenly send their invoice to the buyer when it should go to the Finance Department.
4. Invoice Promptly
You should issue your invoice within 24 hours of the delivery of your goods or services.
5. Follow-up Your Invoice
You should follow-up your invoice to:
- Ensure your client received your invoice. Invoices can go missing in the post or in the electronic ether.
- Confirm that there are no problems with your goods or services. Companies will not pay you until any disputes or problems have been resolved.
6. Put in Place a Clear Collection Process
You should have a collection process which you follow. This includes sending chasing letters, issuing statements and calling clients. Often companies will pay your invoice after a friendly phone call.
7. Have and Follow a Debt Collection Policy
You need to have a debt collection policy that you follow for every client. You must know what to do and when if someone is late in paying you including:
- The exact steps you take to recover the debt. This could include a final phone call or chasing letter.
- How you are going to address the issue with them so it does not occur again
- How their late payment affects their future credit with you
Many companies forget the final steps and continue to fulfil large orders in the hope that their customers will start paying on time. In reality, many customers will take this as a sign that you are fine with late payments.
8. Use a Trusted Legal Partner to Collect Your Debts
You should not allow late payments to slip too far before giving them to a solicitor. Your debt collection policy will determine when they should be handed over.
Else Solicitors has a long-standing reputation as the debt recovery solicitors. We have an enviable 95% success rate after just sending a debt collection letter. This even includes collecting “old and abandoned” debts on your behalf. Else can help to offer advice on how to reduce debtor days, as well as acting on your behalf.
If you would like to find out more about how to reduce debtor days then you are invited to speak to Laura Charles, Acting Head of Debt Recovery today on 01283 526210 or at firstname.lastname@example.org.