There is a good reason most businesses will do anything in order to avoid dealing with their overdue clients. It is time-consuming and not a glamorous task at all. While you cannot (or can you?) eliminate your involvement with your receivables and debtors completely, you can be more productive if you will be able to avoid these few traps that waste a lot of your time:
Gathering information – in order to get started, you or your collections specialists need to understand who owes what and for how long. You might need to review your A/R report or create some sort of spreadsheet. If you have more than few clients in your business, you need to read the notes for each client to understand what’s what and how to approach them. You need to create some sort of high-level report to understand your macro situation. How many hours a week this takes? Even at an hour a week (it’s more) it is over 50 hours a year, more than 1/4 of a full-time position. WOW!
Reaching out to the client – if you have more than a couple of clients, notifying and reminding them about their overdue balances is a task that difficult to scale (should it be like that?). Let’s say it’s only 5 minutes to draft each email. If you have a couple of hundred clients you are looking at 34 hours a month, if you need to remind more than once, double or triple this. More than 1/2 of a full-time position. Crazy!
Getting your facts right – more often than not, you will receive some sort of response to your messages. Getting a response from the client to your inquiry about an overdue invoice is a luxury. But, it also creates an extra workload. Client claims that they have paid the invoice, the client says that you’ve got it all wrong, etc. This can take an infinite amount of time if you don’t have your contracts, invoices and other documents in order. It is also a blocker to get the payment.
Closing – after doing all of the above you still have some work to do before you get to see the money land in your bank. Usually, it will take more than one reminder to get where you want to be. When the money is received you need to send your client a receipt or a confirmation that payment has reached you.
This can take about the same time as reaching out to clients initially.If you are a business with an average amount clients buying from you on credit recurringly, you spend anywhere between half to a full-time position worth of time dealing with the collections tasks. If you spend less time, you are leaving your hard earned money out there. The obvious choice might be to hire collections specialist, maybe you did it, already – but you are still not reaching 100% of the potential. A good collections specialist is hard to find. You will either encounter a cheaper non-professional workforce or a proven professional that costs accordingly – which might be an overkill for a small, family-owned business, cost wise.
Your best option today is to work smarter, not harder. To work on a scale (even a small one) you need to establish some sort of a process.This will make things easier for you, organize your time and will provide your clients with some clarity about what to expect from you if they are paying you late. The fastest way to do so would be via automation. With all the new exciting tech in last few years, you can get a software to take on most of the tasks you were used to by yourself just until recently. You start with the best process from day one, and never miss any invoices. It’s like hiring the best collections specialist to work for you, with a click and for the fraction of the cost.
Gaviti is an innovative way to interact with your debtors. Synced with your accounting or invoicing system, we track your open invoices and debtors in order to get your business paid (on time). It does not only save time but gets an improved result versus the traditional methods most businesses use to collect their overdue invoices today.