Bad debt affects Cashflow and Cashflow can kill business.
Collecting debtors can be easy and simple. You need to be consistent and systemised. See below an outline of the key steps to setting up a debtors system. If you’d like a copy of my full Debtors system email me on nikgray@actioncoach.com and I’ll send it to you.
Step 1 – Reduce terms & review
Stop month end statements and invoice immediately no matter what time of the month it is. Review your terms what’s keeping you at 30, 60 or 90 days? Just because your “Industry” does it, why do you have to?
Step 2 – Choose a member of the team to be responsible
Stress the importance of the role and importance of being a continual process. Support them and set targets.
Step 3 – Have a clear “Aged Receivables”
Clearly mark accounts and their age. Set targets to reduce and review regularly.
Step 4 – Be prepared
Have all the info you need, keep notes and have a set time to make the calls.
Step 5 – Set your rules
Know exactly what to say and develop a script for each call and letter.
Step 6 – Set the tone
Use the 3 “F’s” Firm Friendly and Fair
Step 7 – Follow the contact
Consistency is key, squeaky wheel gets the oil.
Step 8 – Don’t avoid the problem
Get on with it, remember under contract of law they agreed to pay you. They may be under pressure either personal or business so the right amount of empathy and responsibility is needed. Be prepared to “stop supply” and Enforce it!
Step 9 – Review
Regularly review, put them on COD or at least reduce their terms.
