Debt Collection Tips: Do your customers know your payment terms?
Hi, my name is Adam Stewart, Debt Collection Expert and owner of Debt Recoveries Australia.
The best way to manage accounts receivables is to prevent them in the first place. So the best way to do that is to set payment terms and make sure your clients or customers are aware of what they are.
It’s easy to assume your customers know your payment terms. After all, the information should be printed clearly on the bottom of every invoice. It should have the amount of days to pay and penalties terms for late payment clearly printed on each invoice and also on any contract you make them sign.
If you need a free template, you can get them here: http://www.debtrecoveries.com.au/credit-control-free-template-pack/
Make sure your customers know all the penalties for late payment, which can include your debt collection agency fees and/or legal fees incurred in the recovery process. Don’t let your bad payers cost you money. Add these penalties on all contracts and invoices, then your outsourced debt recovery won’t cost you anything.
But do your customers really really really know what your payment terms are?
Contracts are complicated documents that contain a lot of important information. The section about payment terms? That’s easily scanned over before the contract is signed. Moreover, once the document is filed away, all those details can simply slip a customer’s mind.
And that spot on the invoice with all the payment terms clearly stated? Those links should be in bold, with flashing text. A bit of text at the bottom of an invoice doesn’t stand a chance.
So, what do you do? The key is to be proactive.
For example, during the contract-signing process, make sure the payment terms are specifically discussed. This can help to draw out any problems that could arise in the future and it establishes the importance of timely payments – it’s no longer just another paragraph to read and forget.
Detail your trading terms on your website and incorporate a statement in large font on your quotations and other correspondence with your customers. Say something like: “Our full trading terms are detailed on OurBusiness and our business relationship with you will be governed by the applicable terms from time to time. As the terms may change, we suggest that you check our website prior to placing further orders”.
Define a process for allowing credit to new customers and ensure that it is followed.
Remind customers that you have trading terms in place when sending out follow-up letters and statements. Suggested wording would be: “We remind you that our relationship is governed by our trading terms, which are detailed on OurBusiness. Our terms provide that collection and legal costs and interest will be added to overdue accounts”.
Here are more tips for your terms and penalties:
- Don’t assume existing clients know your policies – Just because a client played by the rules the last time doesn’t mean they will this time.
- Review your invoice layout – Your invoices and payment terms might be clear to you, but you see them all the time. Try to look at the invoice from a fresh perspective to see how it could be improved. Aim for a simple design with plain-English language.
- The due date should be obvious, as should any early-payment discounts or late fees.
- Establish a system that enables you to record every bit of client contact, from contracts and invoices through to telephone calls and the receipt of payments.
- Enforce all penalties. Many of our clients are too scared to apply the interest and penalty component, fearing they might lose their customer. Do not be afraid to enforce your penalties on your late payers. It will not only send a strong message to that customer, but they will also spread the word to other customers in your industry about your above average credit control procedures. They will respect you for it.
Have you had experience on customers who do not know payment terms? Share your story with us.
Debt Recoveries Australia is the expert at recovering your outstanding debts without the drama. For more information, email us at firstname.lastname@example.org or call 1300 799 511. Talk to us about your debt collection concerns via Skype at debtrecoveries.