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Top 5 tips for getting paid promptly

Running a business and managing your cash flow can be challenging at the best of times. If you extend credit to your clients, you are essentially a bank, which brings additional challenges in getting paid. So, in order to protect your cash flow when you extend credit, why don’t you start acting just like a bank? As we know they generally get paid!

Here are the top 5 tips that will give you the best chance of getting paid promptly:

  1. Get your contracts in order. Terms and Conditions of Trade set out the rules of doing business with you. However far too many people make the mistake of not clearly outlining these rules to their clients at the start of a business relationship for fear of upsetting them. What is worse? Being upfront about your expectations for doing business together and the consequences (eg. default, additional charges) if these are not met by your client? Or trying to chase payment at the end when your client digs their heels in and having no leverage? Your terms should be disclosed upfront with a Credit Application or Quotation and while you are at it, ask your client to sign a Personal Guarantee. Yes, people do give these, and they can provide you with additional options when you most need it!
  2. Get other people’s contracts checked. Sub-contractor agreements, supply agreements – these should all be checked thoroughly. And if you don’t believe there is any room for negotiating the contract terms, at least understand what you are agreeing to so you can minimise any risks.
  3. Take security over your goods and services supplied to protect your payment via the Personal Property Securities Act (PPSA). The PPSA has been around for over five years now. Businesses are increasingly becoming aware of the power and protection being a secured creditor affords them. This can be done over goods supplied and also for any payments owed. It can be used as leverage over a debtor or protection in a preferential payment defence against a liquidator.
  4. Get your invoicing and debt collection procedures in order. One of the most common errors we see is invoicing the wrong entity. It is vital to know who your customer is particularly where a trust is involved. Follow up payment before the debt is due – for example, a reminder seven (7) days before a 30-day invoice is due. Call or email the day the invoice is overdue and agree a definite date for payment and follow this up with a confirmation email. Issue a demand letter immediately if payment is then not received as agreed, detailing that the matter will be sent to EC Credit Control within seven (7) days if payment is not received. Follow through immediately after the final 7 day period and escalate the matter to EC Credit Control to maximise your chances of a successful outcome. The advantage of utilising a Mercantile Agency like EC is that we charge for the result. Being results oriented means we have “skin in the game” with you and will favour a speedy resolution wherever possible as opposed to tying the matter up in what can become an expensive legal process regardless of the outcome.
  5. Don’t do business with people with no money. It’s hard to get paid when your client doesn’t have the resources to do so. It sounds simple but business still fall for this far too often. A bit of investigation with a proper credit report, just like the banks do, can save you a lot of pain and heartache in the long run. Even if business is tight, taking on a job or working for someone who is never going to pay is a great way to lose money and also send you out of business.

Get these things right from the outset and you will inevitably have more time to spend on growing and developing your business and less time to spend chasing money.

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EC Credit Control (Aust) Pty Ltd