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8 quick tips to get cash into your business and get paid on time
- 2. Focus points to help get cash into your business • Improve your order to cash process. • 8 top tips to get paid on time.
- 3. Important Statistics Now 77% of businesses • Reported that they were continuing to trade between 6th and 19th April 2020. 30% of businesses • Reported that their financial performance had not been affected in the period between 6th to 19th April 2020. 23% of businesses • Increase in unpaid B2B invoices based on statistical analysis of 26 million invoices per week. 58% of businesses • Reported that their turnover had decreased compared with normal.
- 4. Coronavirus crisis brings 50% jump in firms going bust in March as official figures show insolvencies topped 3,700 • Insolvencies surged to 3,736 between March 10 and April 9 • Last year there were 2,495 insolvency appointments in the same period • Well-known firms which have gone to the wall include Debenhams and The Jewish Chronicle
- 6. The steps to getting paid on time start before you send your invoice and before you officially sign your customer up!
- 7. Most businesses that run effectively have excellent systems and processes in place for everyone to follow, like McDonalds for example. Processes are the documents, check- lists and manuals you use to make sure the company runs exactly as it should. D E L I V E R E D WITH PROCESSES C o n s i s t e n t r e s u l t s Thailand Aylesbury Southport
- 8. SYSTEMS & P R O C E S S E S “If you can’t describe what you’re doing as a process, then you don’t know what you’re doing” W. Edwards Deming Two highly recommended books to read to help you get your systems and processes in order, for a smooth-running business!
- 9. Step 1: Customer sign up This first step is key to ensuring customers pay you on time! Key questions to ask new customers: • Are they a Sole Trader or Limited Company? • Director’s name or person in charge • Reg office address and Trading address • Accounts payable details • Contact numbers & emails for the people in charge
- 10. Customer account form template If you don’t have the right details and the customer fails to pay, how are you going to chase them for what you are owed? Using a template account sign up form will help you make this step consistent. All fields must be completed. Any incomplete forms will be returned. Customer Details Type: Company/Organisation or Individual (Circle):LIMITED SOLE TRADER PARTNERSHIP PLC GROUP NGO Company / Organisation Name/Individual: Customer Registered Office Address: POSTCODE: Customer Trading Address: POST CODE: Customer Billing Address: POST CODE: Customer Contact Landline Telephone Number Customer Contact Mobile Telephone Number Customer Email Address Customer Web Address Do you require a Purchase Order Number or Reference Number for payment? Customer Accounts Payable Contact Name & Telephone Number: Customer Accounts Payable email address: Additional Information: VAT NUMBER: Payment terms: Our credit terms: 28 days One off debt collection fees: Payable when debt collected. We accept credit & debit cards & bank transfer Please Sign Below to Indicate Your Agreement To The Terms and Details Above Print Name, sign with signature & state position Signed Date:
- 11. Make sure payment terms are discussed with your customer before they have agreed to buy or sign up, not after they have received the goods or service. This will usually be carried out by the sales person, so put the process in place to ensure they discuss this all important feature! Step 2: Payment Terms
- 12. If you haven’t done a credit check, now is the time. Why? Because you need to be sure your customer has the means to pay you! STEP 3: Credit Check
- 13. 2 3 4 5 What does a credit check tell you? 1 2 3 5 4 If a person or business has any CCJ’s How quickly they pay their invoices Verifies address and director details Credit score / rating How much credit you should extend them
- 14. Step 4: Check & follow “78% of SME’s say they are being forced to wait a month, or longer, beyond agreed payment terms before being paid, while 45% are being kept waiting 2 months or more!”
- 15. Follow the company on Companies House if Limited – it’s a free service that Companies House offer so that you can be informed when a customer moves address or decides to dissolve their company!
- 16. Q: How many people wait until an invoice is overdue before you chase for payment?
- 17. 5. Credit Control Process A few days after sending your invoice contact your customer: Do you have any queries?02 What date is your payment run or plan to make payment by? 03 Did you receive the invoice?01 Doing this eliminates Late Payment Excuses further down the line
- 18. Eliminate Late Payment Excuses!
- 19. TIP: When you send your invoice by email, ask the customer a question like: “how was your weekend?” “how did your “event” go?” When they reply, you know they have got your invoice!
- 20. 8 TIPS TO GET PAID & INCREASE CASH FLOW _________________________
- 21. 1. Make it easy to pay you! The more options that people have available to make payment to you, the less excuses they can give about not paying you! Online BACS Card
- 22. 20% of your Customers will account for 80% of the overall money owed to you Work on the top 20% of customers who owe you money first to increase your cashflow quicker! Did you know you can chase out-standing debts owed dating back for up to 6 years? 2. Chase the highest amount of debt first
- 23. 3: Contact decision maker Don’t speak to John in accounts when your customer isn’t paying, contact the Director or decision maker. Give a specific time and date for payment to be made to you before you take further action, make sure you include a time and date to pay by: usually 12pm & 4pm.
- 24. 4. Accept Payment Plans 01 02 03 04 Compromise Negotiate Formalise Payment When you reach an agreement with your customer / debtor, write a formal letter to advise the amount you agreed to accept, on what dates and for how long. Advise your customer of the consequences of not paying! Put it in writing Especially in these times to accept that many customers may not be able to pay large invoices right away. Be willing You don’t have to reduce your invoice amount but be prepared to negotiate a “reasonable” and “realistic” weekly or monthly payment amount. Prepare You may need to remind your customer to pay you on the said dates. We usually do this a few days before instalment is due. Set reminders
- 25. 5. Charge Interest ? Did you know In accordance with the “Late Payment of Commercial Debts (Interest) Act 1998 you can add Late Payment fees to a debt?” 8% Did you know You can also add 8% annual interest to each invoice amount overdue too? £40 Late Payment Fee can be added Debts owed up to £999.99 £70 Late Payment Fee can be added Debt owed between £1000-£9999.99 £100 Late Payment Fee can be added Debts over £10,000
- 27. Little things that make a big impact Set Reminders If your customer is due to pay on a “said date”, set a reminder to email or call them on that date. Or set a reminder to check they paid the day after and follow up if they have not. Get a promised payment date Knowing when you are going to get paid is great. With companies who have accounts payable departments, often they will have a set payment run date and you can note down when that is. If there is no specific payment run date, still, getting an idea of when payment will be made will help you keep on track with your own finances. Keep in touch The person that shouts the loudest, is usually the one who gets paid… But keeping in touch helps you to keep in the know. It will enable you to notice any changes in the way your customer is behaving! Are they responding to emails or answering phone calls?
- 28. It’s emotional “You’re right! I should feel guilty about asking for the money i’m owed!” (said no one ever)
- 29. THANK YOUFranklin James Credit Management WWW.FJCM.CO.UK
Editor's Notes
- You and all members of staff should follow a new customer sign up process using a simple check-list to ensure each step is followed. Processes help you deliver customer satisfaction & they help you to ensure your staff are doing as they should be. They help you monitor performance, customer service and really dig into the things you can stop, increase and improve. We use a one page New customer checklist when we take on a new customer
- Everywhere from Hospitals to Hospitality uses processes. We have them in place here
- Everywhere from Hospitals to Hospitality uses processes. We have them in place here
- Q: Who has a customer sign up process in place for you and all staff members to follow? Credit control takes time, which is why many businesses either have a member of staff to do it, along with their other jobs, some have an entire credit control team, and others simply outsource it. See the positive of it as a potential rapport building exercise with your customer…. More rapport = more sales ? Talk about the importance of using the word “limited” if the company is in fact ltd If you have a claim with Small Claims court, and you have not included the word “ltd”, the debtor can object stating you have the wrong company name. Talk about how the Registered office might not be the place where invoices go to….. Get as much information as possible before you work with the customer. The customer may see this as rapport building….. Your doing due diligence.
- Will send a template copy of this to everyone. You may not have time for all this, but its especially important in the process of being able to get paid on time.
- Some may not extend credit, but still worth noting the details Talking about payment terms, does anyone do this? Do they find it awkward? Are your payment terms only in your contract? If so, the customer may miss this, so be sure to point it out. Not everyone reads a contract. Talk about it before the gig, never after it! How many of you have a sales team/man? Because usually it will be the sales person doing the negotiating and filling out this form. So make sure they are trained to do this properly and not only to make the sale
- Do your checks first so that you are armed with any new information necessary Have they moved? Have they had recent credit checks from finance companies? Have they had any recent CCJS? Is their social media profile active – gives you an idea of whether they are trading or not. If LTd, are they still showing as active on companies house?
- It will help them determine how they allow the customer to pay. Just because they have a CCJ doesn’t mean they won’t pay. However it helps to give an informed decision on how and when they pay you… WHO WOULD GIVE CREDIT TO SOMEONE WITH 11 CCJs? Who would give credit to someone with 1 CCJ?
- May need to register for the first time to follow the company if haven’t got a companies house login * Check filing history addresses / reg office / directors This will give updates when any changes occur at companies house. Are they striking off their company? And if so, do they owe you money? Talk about a company dissolving
- *** Don’t rely on your customers to tell you that they are dissolving, moving address or changing their name. Use the free service which will inform you.*** Don’t rely on your customers or their websites to tell you this information. If they are limited ask for their company number, so that you can check their name on companies house.
- How many of you then here different excuses as to why you have not been paid?
- Can send by email? Or call, then follow up in writing Doing this eliminates “Late Payment excuses” If you are a larger company sending multiple invoices to clients in a month, then sending a statement on the 1st or 2nd of the month will eliminate the need to be calling them after each individual invoice is sent.
- White board – audience interaction The top Late payment excuses that we hear are: I sent a cheque its in the post I didn’t get the invoice Member of family are sick Account signatory is out of office Invoice already paid Waiting for a payment from their customer before they can pay No payment run till the end of month Invoice is disputed – if the customer says this, a way to combat it is that many companies have in their contract / letter of engagement, how many days the customer is allowed to raise a dispute once the invoice is sent. If the customer fails to dispute within the deadline/ timeframe given, then the invoice is payable. Summary – these excuses can be alleviated if you have a formal process in place
- Make sure you include payment terms, bank details, how you accept payment, make sure you include the word Limited if they are so. If you know your customer and if you know they pay within 7 /10 days, don’t include your payment terms on the email. Because, you don’t want to remind them that they do in fact have 30 days to pay you. The legal default for payment is 30 days, that’s if you don’t state your payment terms on invoices / documents.
- Make sure bank details on invoice, on the email that you attach your invoice to. Take card payments BUT DON’T ACCEPT CHEQUES. Its Archaic or charge a £5-£15 admin fee for cheque payments and put that in your letter of engagement and invoices
- Sort into largest overdue amount of money to the smallest. * do you use an excel spreadsheet for your credit control ? Talk them through spreadsheet
- People work better to deadlines! Everyone does, it’s a known fact Always follow up in writing to confirm what was said if you are speaking with them on phone. So if Dave Director says “Ill pay you by Friday,” put that in writing so you have it. If he doesn’t pay, you have an admission of the debt. Especially if he then comes with another excuse of “im disputing the debt.” He has already said he will pay. There needs to be a consequence of NOT paying by the deadline – we usually say that our next action is to send a Legal Letter, giving 7 days or 30 days to make full payment.
- Be willing to compromise if it is a cash flow problem. Although do reiterate that you are not a bank and that they need to seek funding elsewhere before offering a payment plan But don’t settle for £5 a week! It has to be a reasonable amount of money paid within a reasonable amount of time. Never accept their first offer unless its good. Always try and get the first payment within a few days. Draft up document stating dates of payment and amount.
- If you don’t wish to add a late payment fee or interest, this is your choice, you don’t have to. By sending a Letter before action you are complying with legal requirements. Interest & LPFs are for commercial debts not consumer. Commercial is anything that is to do with business transactions
- If they don’t communicate or if they keep promising payment, you either write it off, and why should you, or you chase for the payment that you are owed. The debtor may have limited means to pay you, but something over a longer period of time (when they really don’t have the money, is better than nothing). By pursuing the debt you are also helping to let other business owners know about this debtor. If and when they run a quick credit check (like you should), they will see this debtor with the CCJ has bad credit and then can make more of an informed decision as to whether to work with them or not. Did you know you can chase a payment / debt dating back 6 years. Give example about the guy who didn’t chase £18K debt because another customer he had went into liquidation and he found it very stressful