Most of us have heard all the excuses as to why an account hasn’t been paid or why it can’t be paid. For effective credit management, we need to prevent the excuse to delay payment.

Here are a few that you can quash very quickly as a reason for not being able to pay:

• 1) I haven’t received the invoice.

Make sure your database can log the date you have sent your invoice – either by email or by post. Failing that – email a copy immediately you are told and follow up in 3days.

• 2) I haven’t received payment from my Debtors.

Suggest that their local bank can provide competitive loans on a short-term basis. If they are trading in this manner it should be a red-flag for solvency issues.

• 3) The cheque is in the mail.

If you have a customer who usually pays you by direct credit and they suddenly want to pay by cheque, they clearly have an issue with cashflow.

• 4) The invoice has already been paid.

Ask for the date of payment, the method and the amount. Ask for proof of any direct credit deposit.

• 5) The accounts person is away/out of the office.

Ask to speak to the Manager and find out who has the ultimate signing authority for payments.

• 6) I have a dispute with the invoice.

Ask for details of the dispute. If the invoice is partly disputed deal with the query and resolve it as quickly as possible. Also, ask for payment of the non-disputed amount.

• 7) We pay Creditors at 60days.

Remind your Customer of YOUR terms and make a note to follow up on that account sooner the next month.

The key is good communication – either via Sales Staff or via your Credit Team. Make a point of speaking to your Customers in good times and in bad. Remind them of your terms and your expectations. Make sure your Sales team is also effective at communicating changes of details with your Customers, to your relevant internal teams.

You should also ensure that you make it clear from the beginning of what your payment terms are and what the consequences will be for default. Terms should be noted in your trading terms, on invoices and on statements. You can vary them at any time but any change should be in writing. Again – effectively communicating the expectations.

Develop robust systems – either by automating systems or with effective processes and policies.

If all else fails call the experts. We are happy to help, with simple and practical advice and solutions to enhance your business processes.