Receive your payments on time
A good way to ensure that your business will not be affected by giving credit to your customers, is to ensure that you have an effective system in place that monitors the payments of your debtors and also to ensure your customers pay on time.
If you want your customers to pay on time, you will need to ensure that you send the invoices to them on time to ensure that they get a reasonable amount of time to settle their accounts. When there are recurring bills, you can schedule them to go out monthly, on a certain date. This will allow some of the customers to even set up automatic payments to your business. Once you have this in place, you will find that more of your debtors will pay on time.
You can consider offering incentives to customers for paying early. This will motivate them to pay early in order to receive something in turn for paying on time. Giving incentives will give these debtors reasons to act quickly and in time to pay their debt. These incentives can be anything from discounts or a free sample.
Another thing that can motivate debtors to pay on time is by adding interest to their accounts if they make their payments to late. When you do this, they will try and pay on time in order to avoid paying extra. This has proven to be a very effective method to motivate debtors to pay.
Keep a paper trail
It is always a good idea to keep track of all the paperwork concerning your debtors. You should keep invoices, documents and bills. If it is possible, you can also make an online backup. This will make for easy reference when there is something suspected. This can also serve as a security measure for your business and customers will feel more secure doing business with you when they know you can be trusted with all the paperwork.
Establish an open line of communication
In some cases, customers just simply did not pay, because they did not know that they were due to make a payment. For this reason, it can be a good idea to phone or email these customers to remind them. This will not happen if you send monthly statements to customers.
People will also be more willing to come and talk to you if they are struggling to make their payments. You will be able to know about and understand their situation better. Therefore, you will be able to adjust the payment terms and be able to adjust your cash flow accordingly.
Debt can be a very troubling thing for certain people. Therefore, you will need to do sufficient background checks to ensure that the debtors will be able to pay. When you stick to these simple methods, you will be able to improve the rate at which your debtors pay you back.