This 2 Minute Accountant episode is about chasing your debts. Because the more money that enters your business, the better your cash flow.
If you have a plumber coming over to your place, on a Monday, and you don’t get the invoice for another two weeks, are you inclined to pay it?
If you get the invoice there, on the spot, you’re probably better off paying it there and then.
Because it’s in your face.
The idea about chasing debts is about having a system. Having a follow-up system. Get your invoices out early.
- After 14 days, send out an update, send an e-mail, “Hey, you owe us money.
- After 30 days, make a phone call. After 40 days, send another e-mail.
- After 50 days, send a letter of demand. It’s about having a system in place.
The purpose of having a system where you’re reminding the person on a regular basis serves two purposes:
- You’re front of thought for them.
- If you end up taking it to court, you can show them you’ve made a big effort to try and remind this person that they owe you money.
Reminders are the key factor in order to try and make people pay their bills. They forget. There are genuine people out there who just don’t know how to manage their business properly.
There are some excellent programs including, XERO, SAASU, and MYOB. You can automatically send out a reminder to all the people who owe you money over a certain period of time. Very important!
What happens if somebody still doesn’t pay? And we’ve reminded them a million times?
The first point of call is to send them a letter of demand. You can write that and get your lawyer to check it or get your lawyer to write it.
If they still don’t pay, you can take them to the local court. It’s called a liquidated damages claim. Go and see your lawyer for more information. But as soon as somebody receives that, they quickly sort it out.