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 Six tips for getting debtors to pay during COVID-19

 

 31 May 2020: Even before the COVID-19 crisis hit, cash flow and late payments were among the top concerns for small and medium enterprises (SMEs) in South Africa. Today, however, insufficient cash-flow as a result of the COVID-19 national lockdown and late or no payments from customers is putting businesses under significant pressure.

Managing late- and non-paying customers should therefore be a top priority for all businesses right now, especially considering the growing concerns that some large corporates are adopting an unfair tactic of avoiding paying smaller suppliers.

 

Below are some tried and tested tips to help curb late or non-payments, as well as to assist your business in recouping owed funds from customers.

 

1.       Include clear payment terms - To prevent any confusion, always ensure that payment terms are crystal clear. Some businesses charge a certain percentage of the fee upfront as a deposit, which can be a useful strategy for weeding out non-paying customers from the get-go, while others include a clause that all services will be suspended when payment is overdue.

 

2.       Have an effective invoicing process – A streamlined invoicing process is imperative for any business. Online tools and software can be helpful in this regard but be sure the statements are simple enough for the customer to understand. Send invoices in a timely manner and make sure there are multiple easy ways to pay, such as e-payments and recurring debits.

 

3.       Maintain communication and top customer service – Keeping in constant communication with your customers and implementing good customer service processes are likely to improve your professional relationships with your customer base, particularly during this uncertain period. This in turn can help limit late or non-payments. It can also work well to incentivise good customer behaviour, such as discounts for those who pay on time regularly.

 

4.       Set reminders and deadlines – The first course of action towards recouping late payments is to remind the customer that they have pending payments to be settled and resending the invoice. Set a deadline within a realistic timeframe and, if the funds are still outstanding by that date, be sure to follow up again.

 

5.       Understand the “Why" – The reason for late payments can be anything from forgetfulness and bad internal processes to serious cash-flow issues. It is therefore vital to understand why the customer is not paying and proceed accordingly. If, for example, the customer is not paying because they were unhappy with your product or service, you need to make sure to address those complaints before chasing payments.

 

6.       Seek legal advice – If all else fails, you may need to consider legal action by consulting a debt collection company or a lawyer to press charges. Before taking this step, however, it is important to perform an honest cost analysis that weighs up whether the legal fees incurred would be worth the risk, or if you should instead cut your losses and write off the debt.

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