One of the most important – yet often overlooked – aspects of running a small business is developing systems and policies to ensure you get paid on time.
Today we’ll discuss the 3 main areas that need to be addressed to keep your cash flow coming in on time.
- Your written Terms Of Trade for providing goods and services
- Your invoicing and payments systems
- Your debt recovery process
Writing Your Terms Of Trade
Terms Of Trade are a crucial element of any business, though if like many businesses you provide goods or services on credit (you deliver the goods/services then invoice for later payment) they become even more important.
Your Terms Of Trade outline the conditions that both you and your customer agree to as part of a business transaction. It is wise business practice to have your customers accept and sign your Terms Of Trade before providing any goods or services to protect your business interest and avoid any disputes over payments.
To ensure your Terms of Trade are legal, enforceable and cover all the important elements it’s recommended to seek professional advice. But to help you get started here are some of the basic items your Terms Of Trade should cover.
- Details on how and when payment is to be made
- Specify your refunds and exchange policies
- Clearly highlight any fees, interest or other penalties for late payments
- Include any special items that are specific to your business or industry
It is also very important to check with a professional that your Terms Of Trade contain no illegal or unfair terms and that they are clearly communicated on all quotes, invoices and any other transaction related documents.
Invoicing and Payments
Developing a consistent invoicing system is important to ensure that cash flow comes into your business as quickly as possible.
It is good business practice to send invoices as soon as possible and include all details of the transaction in a clear manner so that customers understand when, how and why payments are to be made.
Having a set time each day or week for sending invoices or using an automated invoicing system is a great way to make sure you stay on top of all your invoicing duties.
As part of your system it’s recommended to schedule a friendly reminder email or text a few days before the invoice is due to avoid late payments.
No matter how comprehensive your Terms of Trade are, or how consistent you are with sending out invoices and reminders on time, every now and then you will have customers who pay late, or not at all.
In this case it’s important that you have a structured system for following up with debtors and it is also highly recommended to find a reliable and experienced debt collectors who can save you time and money, and ensure you get paid in full every time.
Often a simple, friendly reminder call or email is all that is required to get paid. But sometimes more drastic actions are called for like sending a letter of demand, hiring a debt recovery agency or even legal action.
If you deliver goods or services on credit then you must be aware and prepared to take immediate action on late or non-payments.