Receiving money from clients for goods and/or services provided from your hard developed business is undoubtedly one of the best feelings in the world. As the topic rightly suggest prevention is always better than cure. It is always wise to take precaution before you get loads and loads of debts above your shoulders. No matter your situation, you want to have planning in place to ensure that your goods and/or services you provided gets money that it belongs.
As you prepare for long-term success, here are factors you need to know about receiving payments on time for your business:
- Suitably covered Terms and conditions.
- Accurate invoicing and payment receiving method and to follow up timely.
- A clever debt recovery process.
Suitably covered terms and conditions
For some businesspersons this may not be their first priority, but getting it right is essential to ensure a healthy cash flow. When you are a business that provide credit to your clients it is mandatory that you have proper and well-versed terms and conditions in place to avoid any disputes that may arise in the future. The advantages of having such policies and procedures in place are that the same can contribute to effectively manage your business finances and minimize disputes with payments.
When businesses are in the primary days of starting up and setting up business, there’s an everlasting list of jobs to complete. Among them, sorting out the terms and conditions might not be at the top of the said list. The most attention seeking work will then be getting your product market ready, seeking clients and marketing the product/s. Abandoning this less exciting part of in business, conversely, could impact cash flow through overdue payments. Late payment is a fact of life for businesses, as clients often give lower priority to bills from new firms. With the right terms in place, nevertheless, you can safeguard that you get paid.
Well versed terms and conditions should include the following;
- Specify how payments should be done.
- How payments are to be made.
- Penalties about late payments.
- Interests of late payments.
- Unveil any additional fees that may apply to payments.
- Whether prices are inclusive of GST and other taxes,
- If delivery costs are inclusive.
- Costs of recovery of outstanding invoices.
It is always a fine practice to get the terms and conditions signed by your clients before providing good and/or services.
Accurate invoicing and payment receiving method and to follow up timely
This above said practice, if practiced on a regular basis, will benefit you with strong finances to your business. It should be clearly detailed of the goods and services, amount to be paid, due date and available payment methods.
The aspect of knowing the difference of invoice and tax invoice also bears an importance in this regard. If the business is not registered under Good and Services Tax (GST), the invoice should not contain a taxable component and should be only referred to as an ‘invoice’. Nonetheless, if the business is registered under GST, the invoice should state the GST against each item and have the words ‘tax invoice’ included. The Australian Tax Office has established voluntary criteria concerning to the outline of tax invoices and invoices, as well as practical material for issuing tax invoices. It is paramount to observe debtors diligently and act speedily when payments are due.
It is the invoice that formalises the request for payment. The use of an invoice has several recompenses.
- It prods payment.
- Invoices prompt clients of the work completed for goods and/or provided.
- It is a useful record-keeping tool.
- It is an opportunity to send a positive message about your company and brand.
A clever debt recovery process
From the start of your business whether you still have debtors or not it is always safe to have a good debt collection process and techniques in place. Not being rewarded for the goods and/or services the businesses have provided will impact on the cash flow and profitability of the businesses. Instituting a procedure to deal with non-payment and recovering debt is therefore paramount. It is also significant that the process allows one to maintain a good relationship with their clients.
The smartest way to tackle this issue before it becomes an issue is by outsourcing a reputable debt recovery agency. Whether you have due money or not, by having a virtuous firm as your debt collectors will surely give an idea to your clients that you have proper procedures in place for due payments and you are serious about your payments and you mean it. In some circumstances, the only mechanism to prompt a debtor to pay up is a letter informing them a Debt Recovery expert has been appointed.
A debt collector will act on your behalf to pursue a debt from your client. They will charge a fee or a percentage of the total amount collected.
Pros of using a debt collection agency to shelter payments from bad debtors:
- By hiring a third party to manage these sums unpaid, businesses can save valued time and resources.
- Debt Recovery Agents tried and tested methods of debt collection can increase your chances of recovering bad debts in full.
- Send out a clear message to other customers that late payment and bad debts will not be tolerated.
Invoicing has more to it than just getting paid. It is also a path way for you to shape and strengthen your relationship with your customers. The best way to accomplish that is by personalising invoices.