How to secure your payments from customers?
Tuesday, 03rd May 2022
Of course, it would be wonderful if all your customers paid you on time every month but, I am afraid, we are not living in a Utopian world. In any case, it would make credit control rather boring and we would not be able to showcase our collection techniques and our negotiation and influencing skills!
If you have supplied goods or delivered a service and there has been no query or complaint raised by your customer then, effectively, you have completed your side of the sales contract. Now it is the turn of your customer to complete their obligation i.e. payment within the agreed payment terms and there is no harm in your re-iterating this to your customer.
It is imperative that you dispatch the invoice within 24 hours of providing the goods or service in order to help you in your quest for payment to be received within the stipulated credit terms.
However, it does not always happen this way. Many people find it difficult to pick up the telephone and ask for payment so I would suggest that you adopt the mindset that you are only requesting something you are entitled to. You are not asking for anything more or anything less!
It is also human nature for many customers to only pay their invoices when they are reminded to by your telephone call. Therefore, you must strive to build a relationship with the customer, be confident and firm but polite and professional at the same time, because we do not want to upset the customer.
- Credit control is all about relationships (both internal and external) so for large customers and key accounts you should commence dialogue at the outset. It is important to establish who your contact is in the Accounts Payable team and to understand what their processes are for approving your invoices for payment. For example, this may include unique references or purchase order numbers needing to be inserted on your invoices to speed up the authorisation process. It could even be that you need to be aware the billing address is different to the delivery address.
If you ascertain all this information at the time you grant credit facilities to the customer you will gain their respect and trust from the outset, which is a solid foundation for maintaining a good business relationship. Furthermore, you should find out as much as you can about your customer’s business and make sure you know exactly what products they buy from you. This all helps to make your conversations with the customer much smoother even when it involves a request for payment.
Sometimes these calls can be difficult; the very fact that you are only ringing the customer because the payment is overdue can put both parties on the defensive and/or aggressive and this does not bode well for a positive relationship. I find it good practice to contact the major accounts BEFORE payment due date to find out if everything is OK and to obtain an idea of how much has been processed for payment. If the figure is not in line with what you are expecting, then you can investigate the reasons for the discrepancy and act accordingly. It could be that your counterpart is missing all the invoices relating to a particular depot, for instance.
Also, keeping your customer ‘onside’ throughout the month is a must. The timely response to queries, sending a copy invoice or issuing a credit note which is due are all ways of making your customer feel special. It may not seem a big deal to you as to whether your email the copy document today or tomorrow but it means everything to your customer and how they perceive you and your business. This all aids improved cash collections and the cultivating of relationships.
If your customer is experiencing real problems (such as cash flow), has a genuine grievance or is offering excuses for non-payment, do not be judgemental and adopt an approach they might find intimidating. Instead, you should ask probing, open questions (“How…?”, “Why…?”, “When..?” etc.) to ascertain exactly what the problem is. Then, when they start to explain you should be attentive and empathetic to their situation before trying to find ways to resolve the situation to both your customer’s and your benefit.
It may be sensible to help a customer through a short-term cash flow problem by agreeing to a payment plan for around three months to deal with the arrears and the current invoicing. It is far better to do this and help the customer continue trading through a difficult period rather than withholding supplies, taking legal action and, perhaps, putting them out of business. If this happens the relationship breaks down entirely and you are unlikely to receive any payment. On the other hand, if you offer a helping hand, as mentioned above, you will be rewarded with a continuing strong relationship with a customer.
It could be that your customers find it difficult to pay all of their suppliers each month. Whilst it may be true that “he who shouts the loudest” may be paid first, it could be at the expense of losing that customer going forward. It is far better to build and maintain a relationship by being professional, persistent, approachable and reliable in order to ensure your firm is always in the band of suppliers which your customer will pay each month.