Keeping your debtors to a minimum is important to ensuring your business is a continuing success. However, reducing your debtors can often be a task which seems much easier said than done. Have a look below to see our top 5 tips for keeping your debtors down as much as possible.
- Reduce your trading terms – if you haven’t revised your trading terms for a while, it’s quite possible that they’re not doing you any favours. Trading terms of thirty days can easily be reduced to something closer to seven days. This can be actioned immediately for any new customers, just make sure you give your existing customers a reasonable amount of notice for any changes.
- Use a debt collector – having an employee who holds responsibility for chasing debts means debtors will be actively chased, making it less likely they’ll sit unpaid for some time. Have a look at your admin structure to see if there is any way debt collection can be covered by your current staff. If not, hiring a part-time debt collector could be a wise move.
- Offer incentives for upfront payments – payment upfront clearly helps your business cash flow, so if you can afford to offer discounts for customers who pay immediately then do so. Make sure you look over your budgets before making any changes, however, the benefits of any price reductions clearly need to outweigh the costs.
- Offer quotes upfront – another method for encouraging upfront payment is to provide your customers with certainty as to what they will pay and when in different scenarios. If they know exactly what will happen, including any reductions for immediate payment, your customers will feel more confident in what you’re offering and are more likely to take any offers you can give them.
- Improve your screening process for offering credit – you might want to offer credit to every client in order to keep their custom, but the truth is that not every customer will be someone to whom you should be offering credit. Make sure your credit application process is robust, including credit checks and references through reputable credit research companies. That way, you’ll only offer credit to those customers with a positive credit history, thereby increasing the chance that they’ll make payments to you.