Five tips to help you get paid

Five tips to help you get paid

WHAT’S A GOOD WAY TO ELIMINATE DEBT PROBLEMS? Stop them from occurring in the first place.Prevention is far better than cure,so here are five tips to help make sure that your invoices are paid on time.


Establishing clear rules,systems and procedures at the start is the best way to make sure that you avoid problems.

Avoid offering credit and be prompt at invoicing

Reduce the number of credit accounts you offer.If possible,avoid extending credit at all by trying to get payment straight away.If you’re dealing with business customers,try to offer credit only to regular customers who have a proven record of paying on time.

Customers are unlikely to pay until they have been invoiced.

There is no rule that states invoicing should be left until the end of the month.Instead,complete invoices as sales are made and send them promptly.Email invoices rather than posting them,to cut down on response time.Or even produce an invoice as soon as you’ve completed the job,face-to-face,if possible.This is especially relevant if your customers are individuals.

For example,trades people should ask their customer “Are you happy with the job?” and when they say “Yes”, they should produce the invoice.The customer’s natural reaction is to reach for their wallet.There are several payment solutions,such as ANZ FastPay,that enable you to take EFTPOS and credit card payments on the spot from your customers as soon as the job is done.

Check creditworthiness

Where circumstances dictate that you should provide credit,the customer should complete a standard credit application form,so you know exactly with whom you are dealing.This is the time to agree on your credit terms,so that your customer is aware of when payment is expected

If you don’t have such a form,ask one of your suppliers if you can use their form as a guide,or get a free sample from a debt collection agency.Ask your lawyer and your accountant to review the form you choose;they may suggest improvements.The form should include aspects such as a provision for interest payments on overdue amounts and a personal guarantee from a director if you’re dealing with a limited liability company,and if you’re offering a significant level of credit.If the customer refuses any of these,it is your business decision whether to take the risk of supplying on credit.

Check credit referees to make sure the individual or business has paid promptly in past dealings with other businesses.If in any doubt,ask a credit agency for a credit check on a prospective customer.


Without an efficient system for involving customers,a business heading for debt collection problems.

Set shorter terms

Many people seem to think that ‘payment by the 20th of the month following invoice date’ is a tradition that has to be followed.It is not.Change your payment terms for new customers to ‘Terms:payment within 7 days’ and you are well on the way to improving your cashflow.For existing customers you can phase in the new terms,for example,announce the change will take place at the start of the next financial year.

Eliminate statements

End of month statements simply sum up what the customer owes.This extra administration step costs time and money,so why not eliminate it if possible?

You can do this in many cases by stating at the bottom of all your invoices in bold: ‘Please pay on this invoice as no statement will be sent’.

If you have to send statements,avoid the layout common to many statements that shows how long payments have been outstanding: 30 days - 60 days - 90 days - Total.This layout simply encourages tardy payers by signaling that you are prepared to wait up to 90 days for payment- after all,it’s on the statement! A better layout omits the time spans,for example: Current - Overdue - Total.


Follow up unpaid invoices promptly

Few people enjoy chasing up people for money.But the longer you leave an unpaid invoice,the less likely your chances of getting paid.The faster you collect debt,the better your cashflow will be (and the more attractive your business is to a potential buyer,if you wish to sell it).

Stick to your terms of payment

What’s the point in setting out terms of payment and then not sticking to them? Customers will soon work out that you don’t mean what you say.If people have accepted your credit terms,then you have a right to expect payment on time,and you are entitled to contact them if this does not happen.

Review all your credit accounts regularly and phone those who have not paid within the agreed period.The earlier you start your credit control,the more relaxed you can make your initial contact.

Cut off credit if necessary

Adopt a consistent ‘stop credit’ policy of refusing to supply customers who are seriously overdue.Ask the customer to settle the outstanding debt first before you supply more goods and services.


If the average age of your debtors’ ledger is 55 days,you could set a target of reducing this to 40 days.Your accountant could help get a benchmark figure for your industry to nhelp set targets.For example,if the average for your industry is 40 days but your business takes an average of 47 days to collect debts,your business is less efficient than the industry norm,and there is room for improvement.


Beware of large orders

You may be delighted to get that large order,but what happens if you commit significant resources to fulfilling it and payment is delayed - or you end up not getting paid at all?

AT least make sure you’ve checked creditworthiness and received guarantees.If possible ask for a deposit or arrange for progress payments to improve your cashflow and reduce your exposure.

Danger of the single customer

If your business is dependent on just a few customers,you could think about making customer diversification a top priority.

It is  better to spread your risk over 10 smaller customers than depend on one large customer for your business.