Downtime is a perfect opportunity to give your business a detox too, especially if your cash flow has become sluggish due to late payers. A debtor detox can flush out the worst offenders and clean up your ledger so your business can enjoy a healthier outlook in the year ahead.

Your business could benefit from a debtor detox if its suffering from any of the following symptoms:

  • More than 40 percent of customers pay late.
  • Your staff waste too much time chasing unpaid invoices.
  • You worry about not having the cash to pay your own bills.
  • You’re feeling increasingly frustrated with your late paying customers.

Once you’ve accepted that you have a overdue debt problem, where do you begin to fix it? This 8-step plan should help:

  1. Identify the worst of the late payers

Your worst offenders fall into two categories: the ones that owe you the most money (getting that money back into your account will greatly improve your cash position) and the ones that are the longest overdue (invoices are less likely to be collected the longer they age). Find this data from your aged receivables report. Pinpoint your top six offenders in each category – these are your target debtors for the month. (Note: If you’re using automation for debtor management, you can target every debtor, but if you’re not, set a realistic number of debtors you can pursue manually).

  1. Send a schedule of reminders

If you haven’t established a culture of prompt payments in your business, your customers are likely to need a few reminders from you before they pay. Map out what your reminder workflow will look like. Here’s an example:

Day 1 – Send an invoice reminder by email.

Day 4 – Make a phone call to your debtor.

Day 7 – Send an sms reminder to alert your debtor that payment is due.

Your reminders should be polite and clear about your payment expectations. Attach a copy of overdue invoices and make sure debtors know how to pay you (EFT, credit cards you accept, etc). If there are consequences for non-payment as per your agreed terms and conditions, include these in your reminders to your debtors.

(Here’s a free ebook with invoice reminder templates you can customise for your own business.)

  1. Send a demand letter

If your internal efforts fail, it’s time to consider outsourcing to the professionals. Find a debt collection agency that supports positive collection techniques i.e. will advise you on your probability of getting paid, and will work towards making a collection while preserving your customer relationships. The debt collection agency can start with sending a demand letter. This is a relatively inexpensive action that often prompts payment, particularly if it arrives on a third party letterhead. You can send a demand letter yourself if you have the time to write one and follow up with responses (if not, outsource). You can find some tips on how to write a demand letter here.

  1. Be prepared to negotiate

Empathy  goes a long way with customers. Be prepared to listen to their reasons for non-payment, then negotiate a way forward. It may mean that your own business needs to fix a faulty product or service before your customer is willing to pay. Or perhaps your customer needs a payment plan in order to make part payments. While you’re speaking with your customer, ask questions to understand what caused the delay in the first place – knowing this could help you avoid these obstacles in the future.

  1. Update your customer details

Chasing payment is almost impossible if you don’t know how to contact your debtors or who to speak with. Use the slower month of January to update your contact details for customers (your sales team may have the most current information). Key information you need is the name and email address of the right person to receive your invoice, a phone number, address and any payment schedules you should be aware of.

  1. Install an online payment gateway

Be honest – is it too hard to pay you? If your business still requires your accounts person to be at their desk to process a payment, you’re making it too hard for your customers to hand over the cash. Customers now expect to be able to transact at any time of day or night, and small business owners are often attending to their paperwork after hours. Research from ezyCollect found that 6 percent of payments were made in the two hours after closing time (5pm-7pm) and a further 31 percent of payments were delayed because the transaction couldn’t be completed online and after hours.

With January being holiday month for your staff also, online collections means your business can remain open 24/7 to accept payments.

  1. Refresh your credit policy

Your credit policy may no longer reflect the needs of your business or how you want to allocate credit to customers and manage debtors. Have you documented your credit risk assessment process? Are you prepared to set and monitor credit limits for your customers? Taking a proactive approach to credit control starts with documenting the credit control processes you want to adopt throughout your organisation, then embedding them in systems that will support your intentions.

  1. Update your processes

Efficiency is a key word in debtor management. If chasing unpaid invoices is taking you away from other key functions in your business, your processes need an update. For instance, you may decide to outsource debtor management to a bookkeeper or automate invoice reminders and payments. Detoxing your business of the outdated processes that don’t generate returns is a long-term investment in protecting your cash flow.

Doing a clean sweep of overdue debtors now gives you a better platform from which to launch into 2018. What could your business achieve this year if you had the cash and confidence that comes with being paid on time?