Why receivables is so hard to solve
There’s literally hundreds of blog posts giving you the 7-10 steps to reduce debtors and improve cashflow. Yet the debtors problem still exists to some extent in the majority of small and medium size enterprises (SMEs) globally.
In New Zealand alone, SMEs are the biggest lenders and poorest at managing it, with over $1 billion owing their businesses collectively.
When it goes wrong:
- You’re sending too many email reminders (causing needless friction)
- You’re posting too many statements
- You’re making too many phone calls
- You’re lending too much cash to your customers
- You’re writing off too much bad debt
- You or your team is burning too much time chasing late payers
- Your customers feel unloved, harassed or threatened
Good advice and support is hard to find.
- The cashflow cycle is an integral part of business and impacts every part from sales through to delivery, account management and accounts/admin. Therefore the issues are hard to diagnose.
- It’s too important to ignore – poor management of cashflow can cripple a business.
- General advice does not suit all your customers.
- Bookkeepers and accounts are not equipped to help.
- Good, tailored tools are hard to find. What do you use – emails? spreadsheets?
Where to start?
The solution is not a ‘one size fits all’. Sending out loads of email reminders won’t work for everyone – and will be causing needless friction. However, when used with purpose and written in the right tone, asking the right questions, they are a good starting point to ‘open the can’.
Personalised, automated email reminders can:
- Gently remind those who ‘Oops I forgot’
- Reiterate your terms and consequences
- Give unhappy customers a chance to respond, which starts the conversation
- Save you money on manual follow up, calls and posted statements
The question is, based on your situation, how should email reminders be deployed to save you time, collect cash or surface questions and disputes.
Introducing divide and conquer – a strategy for eliminating debtors forever, long term
Your business is supported by a variety of different groups of customers, who are going to react differently to your followup approach for late payment.
By developing a well researched, proactive, segmented and proven strategy, it is possible to run a business with happy customers and without debtors or late payers. Ultimately, freeing your or your team’s time to get back to the doing the business you love.
By implementing a this proactive approach, it considers all your different customer groups and all aspects of business from quoting, payment terms, onboarding customers, work delivery, invoicing, followup and lastly, ease of payment.
There are multiple, moving parts to receivables management. Credit control is not straightforward. There are experts out there who are able to help you start to get your process right, enabling continual monitoring and improvements as your business grows and changes.
Debtor Daddy are an outsourced receivables department.