credit policies. After all, most invoice
issues occur the first time you invoice a
new customer because something was
setup wrong, such as missing purchase
order, wrong address, incorrect billing
rate, etc. With a good collection software,
you’ll have a lot more time to contact
customers, minimizing the possibility
that you simply can’t reach them in time
to resolve the issue.
Non-Billing Issues
There are many other reasons why a
customer may dispute an invoice that
has nothing to do with the invoice
itself. Keeping track of each reason why
a customer disputes an invoice can give
insight into common problems. If they
are often because of non-billing issues, it
may be time for the company to look into
and upgrade their manufacturing process.
Recommendations
Make sure the invoice includes the
correct customer purchase order number,
and make sure that the customer receives
the invoice. These two actions alone could
potentially eliminate 60% of your late
payments combined.
The goal to getting paid on time is to get
the right information to the right person
in the right format, and in time for them
to make a payment as easily as possible.
By preventing internal issues such as
missing purchase orders or not sending
invoices to customers, and by offering
flexible payment methods to customers,
you will certainly reduce invoice disputes
and will get paid a lot faster than you ever
imagined possible.
Analyze customer returns and seek ways to
reduce them as these add significant costs
to your bottom line and act as barriers to
retaining customers and growing sales.
Understand that it is not your fault
that a customer is experiencing cash
flow problems. If you provide a quality
product or service and graciously extend
credit terms - it is their responsibility to
pay you on time. Sometimes you need
to be flexible with your customers that
are experiencing short-term cash flow
problems, but in other cases you need to
remain firm and continue to pursue every
option you have to get paid. After all,
there is a cost of cash, and every day that
goes by it becomes less likely that you’ll
ever see your money; which affects your
own cash flow and profitability.
The financial supply chain is an interwoven
system. The health of your customers will
inevitably impact your very own financial
health, so be proactive and work with your
customers so you can succeed and grow
together.
Identify Underlying
Problems
People want to be honest, but sometimes
they avoid difficult questions and tell you
what they think you want to hear instead
of the truth? It happens all the time in
business. Businesses are representative
of the people they employ. A customer
that is experiencing financial difficulties
is unlikely to tell you that they’re getting
ready for a second round of layoffs and
they’ve cut back to one shift in production.
Instead they say that business is great.
One of the nuances of credit and
collections management is to identify
underlying problems with your customers
before they become major issues.
Wasilwa Miriongi is a Certified
Credit
Professional
currently
working as the Managing Director,
Del Creder Credit Management
Limited. You can engage him on
this or related matters via email at:
[email protected].
AN ASSOCIATE OF:
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Kilimani Road Apartments 04
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