But even more importantly, when is a “sale” really “a sale”? When, the cash is banked.

Be secure in your inception/sales phase

The manner in which you originate your credit facility is critical to how successful you will be in collecting extended funds should your client run into financial trouble or claim to have a valid dispute in relation to your accounts. 

It is important to have a solid contract in place that addresses your terms of trade, payment options and the need for director’s guarantees when extending credit to a Pty Ltd entity.

Be guided by your ageing bands

In house debt should be aged and your actions are guided by how overdue a particular debt is. Be clear with clients about your terms of trade and when you expect payment to be made. Decide at what point in the cycle you will refer your clients to a competent external legal service provider or mercantile agent. 

Your own internal reminder notices should build the urgency as the debt moves from 30 days overdue to 45, 60 and 90, upon which time internal stake holders need to be aware and concerned as to the status of the unpaid account. 

Be consistent in follow up actions

Your diligence in following up arrangements or promises made by your clients determines your credibility and position in a client’s payment queue. It is critical should an arrangement be made that you check payments on the due date. Follow up immediately should a promise not be kept, to ensure your clients know you and your credit provisions are serious. 

If you advise a client that you will outsource the matter should payment not be made and you fail to do so, you are at risk of becoming a soft target and your position in the payment pecking order will diminish.

Offer a payment method that removes manual actions from the client such as direct debit

It is often beneficial to work with a client who has short term hardship or cash flow problems. In this circumstance the method of payment becomes critical. Should you find you have a significant number of clients who are conducting short term payment arrangements a service such as direct debit through a third party specialising in such payment methods becomes highly beneficial. The advantage, aside from freeing up your internal human resources include a processing fee charged by the customer’s bank in the event of default, providing a deterrent which is being managed by a third party.  

Have a competent third party to take action in the event an acceptable arrangement cannot be negotiated

Let’s face it, most of us have had a delinquent debt arise in small business that no matter what action we take, we have simply been unable to secure payment. In this event it is important to have an experienced third party who is willing to work on a partnership basis to advise you in your credit processes and assist you in the unpleasant circumstance of necessary legal action. Select a provider with a similar business philosophy whom you can trust as brand protection within the recovery process can be a delicate issue.