It’s no secret that times are tough for many businesses, and we’re seeing more and more owners facing heightened cash flow pressure. While several factors can impact cash flow, one trend that’s becoming more common is the rise in slow-paying clients.
Getting paid is top of the list when it comes to managing cash flow. Here are our top tops to help you stay on track:
1. Set clear expectations from the start
When onboarding new clients, be upfront about your payment terms and expectations. Make sure they understand your invoicing schedule, payment deadlines, and any penalties for late payments. Clear communication from the beginning helps prevent misunderstandings and sets the tone for a smooth financial relationship.
2. Implement strong terms of trade
Your terms of trade should support positive cash flow. Outline payment terms, including due dates and late fees, in your contracts. Ensure these terms are agreed upon and documented, reducing the chances of disputes and delays.
3. Have a written debtor process
Create a written process for managing debtors. This process should detail how you handle overdue payments, including steps for reminders and follow-ups. Having a structured approach ensures consistency and helps you stay organised.
4. Invoice quickly and request prompt payment
The sooner you send out invoices, the sooner you can expect payment. Aim to invoice as soon as the work is completed or goods are delivered. Clearly state the payment due date and include all necessary details to avoid any delays.
5. Make it easy for customers to pay
Simplify the payment process for your clients. Use platforms like Stripe or GoCardless to offer various payment options. The easier you make it for clients to pay, the more likely they are to do so promptly.
6. Take deposits and set up regular payment plans
Requesting a deposit before starting work can improve your cash flow. Additionally, consider offering payment plans for larger projects, breaking down payments into manageable instalments. This approach can make it easier for clients to meet their financial commitments.
7. Establish a clear follow-up process
Set up automatic payment reminders in Xero. These reminders notify clients as soon as their payment is overdue, reducing the need for manual follow-ups and ensuring timely action.
8. Keep detailed records of debtor communications
Maintain records of all interactions with debtors. In Xero, you can attach notes to invoices, documenting every contact and discussion. This record-keeping can be invaluable if disputes arise or if you need to escalate the issue.
9. Check in with your clients
Sometimes, clients may be experiencing difficulties of their own. Regularly check in with them to understand their situation. Showing empathy can strengthen your relationship and provide insight into their payment capabilities.
10. Offer payment flexibility
Providing flexible payment options can make it easier for clients to meet their obligations. Be open to negotiating terms or creating customised payment plans that accommodate their financial situation.
11. Be firm about payment expectations
While flexibility is important, it’s equally crucial to be firm about payment deadlines. Clearly communicate that timely payment is expected and enforce your terms consistently.
12. Refer to external debt collection agencies if necessary
If all else fails and payments remain overdue, consider referring the debt to an external collection agency. This should be a last resort, but it can help recover funds and alleviate cash flow issues.