Did you know that you still have to pay tax on your debtors, even if you haven’t yet collected them?

This is because you pay tax on your sales figures, whether you’ve collected the cash or not.

So, how do you collect your debtors faster?

Agree your payment terms at the time of sale.
Ensure your customer signs your Terms of Trade before you start the job.
Include a guarantee in your payment terms.
Invoice as quickly as you can.
Make it as easy as possible for your customers to pay you - Have direct debit and credit card payment facilities available for all transactions. If you have regular repeating transactions with customers, require that they sign up for Direct Debit or automatic credit card payments for these repeating transactions so you automatically get paid on the due date.
Ask for a deposit prior to starting the job.
Change your payment terms to within 7 days of invoice or on delivery.
Send statements with only two columns - current and OVERDUE.
Follow up the day after the due date - Xero will do this automatically if you have invoice reminders set up.
Have someone other than the owner be responsible for collection of debtors (owners are usually too soft!).
Document any changes to your standard payment terms in writing.
Use a debt collector sooner rather than later - the longer you leave it, the harder it is to collect.
Don’t provide credit to customers who’ve been late payers in the past, and don’t offer more credit to customers with outstanding payments.

In our experience, the longer you leave it to deal with an overdue account the less likely it is that you will get paid. Don’t procrastinate on your debtors. Establish clear payment terms and make sure you stick to them.