No-one wants to be the happy-go-lucky one twiddling their thumbs and waiting for a payment to land, especially during the cost of living crisis we’re in. Plus, with recent research from Xero citing more small businesses are experiencing cash flow issues than ever before, the truth is this: none of us can really afford to.
As remote bookkeepers, we see time and time again the same mistakes being made when it comes to chasing an invoice and getting it paid. If this is you, these debt collection tips should get your balance sheet back into harmony, stat.
Being paid is your right, so make the first move
Don’t be an alien – If I asked you today how much hard work had gone into the product or service you offer, I’m sure you’d answer something along the lines of: “much more than I charge for it.” You deserve to be paid for the work you do when you do it, and shouldn’t feel bad insisting on that. So, remember this: you’re not an alien, and you need to make yourself known. Make contact – it could be as simple as that.
Trust the process – You don’t have to go in all guns blazing when it comes to the first reach out. In general, the following framework is a good communication pathway to follow: two polite emails 5 days apart (once the invoice is first overdue), followed by a stern email before moving onto phone contact. The phone contact is helpful because there’s a very real chance at least one or more of your email communications has ended up in their spam folder. It allows you to verify whether they have been genuinely ignoring you, or just haven’t seen your reach outs.
Use an alias for a confidence boost – Some people just aren’t confrontational by nature, and that’s okay. So, if you’d feel more comfortable not being the face of your communications, do it via an alias email. These are easily set up through your email hosting platform, and you can use a specific name (like a fictional HR person), or simply ‘accounts@’. Alternatively, use your virtual bookkeeping service – like your remote bookkeeper to reach out for you. We do this for many of our clients and are happy to.
Tweak your trading terms
Make trading term changes – That old saying goes for repeat offenders: fool me once, shame on you, fool me twice – shame on me. If you’re struggling to enforce the specifics outlined in your trading terms, then they probably need a tweak for this reason. Even here at Dollars and Sense, we used to invoice monthly with 7-day terms – but often we didn’t get paid for another 2-3 weeks after that. So, we changed to fortnightly invoicing and 4-day payment terms to create better cash flow, and it worked.
Set up automatic invoice reminders – To help speed the payment process along, don’t forget to set up automatic invoice reminders to go out at the default dates of 7, 14 and 21 days if you’re a Xero user. Make sure you have attached a copy of the invoice in every reminder, and make it as easy as possible to pay – offer options in the footnote if you have them. (As remote bookkeepers, we can set this up for you if you aren’t comfortable using Xero yet).
Add a late fee on future invoices – A late fee on late payments is just smart business, and more than fair. A 1%-2% monthly compounding interest fee on late payments can be just the kick up the bum some heel draggers need, but note that you can’t charge this unless your customer has agreed to it first as part of your trading terms. For future invoices, ensure it’s added to the paperwork accordingly – and if your payment is more than 8 weeks overdue, be sure to stop any future work or orders until it’s up-to-date again.
Be a squeaky wheel
Persistence beats resistance – Being consistent with your communication can absolutely be respectful and kind, while also sending a message that you have an expectation. Squeaky wheels do get oiled first, and you should not give up when it comes to reaching out to non-payers. Remember: persistence beats resistance… keep going, and make it clear that they won’t stop hearing from you until the debt is paid.
Get on the phone – Getting on the phone gets things sorted, and despite being a virtual bookkeeping service for our clients, we can help with this (we’re very comfortable on the phone in these situations). If you wanted to give it a go yourself first, this short script should help. Remember to stay direct and to the point. Once you’ve finished speaking, just wait – you’ll feel compelled to fill the silence, but let them speak and don’t get off the phone until you’ve got a concrete timeline.
Hi [Name], hoping this finds you well! Your last [number of] invoice[s] have been overdue for [time period]. I’ve just re-attached it to an email for reference in your inbox, but while I have you, can you tell me when it’s all going to be settled?
Give notice of professional debt collection – If they are unclear or vague (or don’t answer the phone at all), you can give notice of your next step: formal debt collection.
Take it to the professionals
Leave it to the professionals – A formal debt collector can help you recoup any losses. The process is this: for a nominal fee (between 5%-30%) of the amount (with a usual minimum expected), they will send a formal letter of demand, requesting the debt is paid by a particular date. Sometimes a second is sent as a follow-up, with a clear outline that legal action will ensue. Usually, the same collection agency can take this legal action on your behalf, and it can be worthwhile for large sums.
Virtual bookkeeping can help –As remote bookkeepers servicing a range of small business clients across all industries, we can take care of that first phone call, or send a letter of demand on your behalf. If you’re struggling with this currently, or want to get your fiscal ducks in a row ahead of time, we’d love to chat with you.
Getting your debts paid and balance sheet straight doesn’t have to be rocket science.
Our virtual bookkeeping services cover everything from Xero setup to clean up jobs to consulting and advisory on debt collection. Reach out now for a no-obligation chat and quote.
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