In the current economic climate, managing cash flow is one of the largest issues business owners are faced with daily. Negative cash flow generally results from either poor debt recovery strategies or a lack of procedures to ensure cash is collected in a timely and efficient manner.
So how do you maximise cash flow, minimise loss and get your business to where it needs to be? Here are our 5 top tips:
- The Contract:
While a verbal contract is legally enforceable, reducing the contract to writing before you spend valuable time and resources is the way to go. Having terms in place from the outset means you clearly set out what you are being asked to do and your expectation on how and when you will be paid. This avoids it later becoming a contest of ‘he said’, ‘she said’.
- Know your customer:
While this is a fairly obvious one, you would be surprised at the confusion that arises as to the person or entity that legally has engaged you. Often customers may be asked to complete credit applications, sign contracts or complete order forms, but if these are not checked to ensure they are completed properly and the information verified through simple searches (e.g. a free search of ASIC’s records), they are of limited value.
- Retain proof:
If you ever need to sue to recover a debt, what you are able to prove in court may be the difference between winning and losing. So, keep copies of basic documents such as the signed contract, confirmatory emails, purchase orders, tax invoices and any admissions that the debt is owing.
- Establish a debt recovery process:
Have a system that follows up on unpaid invoices. Being assertive and following up early means you maintain momentum and credibility. Ask yourself:
a. what systems do I have in place to keep track of unpaid invoices?
b. do I send out reminders / demand letters and address any disputes promptly?
c. do I make a note of mail marked, ‘returned to sender’, and then seek to obtain more current contact details?
At some point, look at outsourcing recovery of your debts. This point will often be when you have received no response to your own demands and need to step it up a notch. Often a letter of demand from an outside solicitor may be all that is required to get your customer “talking” to you, either to deal with a dispute or to make an arrangement to pay. If legal action is required to be taken, then in the hands of a professional this can be effectively and efficiently handled.
The law provides for many different paths to assist you with recovering your debts. Knowing the right move for you can be tricky without fully understanding the options available to you in your circumstances.
For all your debt recovery needs we are happy to assist and provide you with guidance. Our aim is to maximise your recovery potential.