Management of receivables is a complex process. Nevertheless, Dear Entrepreneur, try to remember – at least – three basic rules: check your future (and current) customer, take care of documents and demand payment immediately. All these actions will help you to maintain financial liquidity and take care of business security, without exposing yourself to high costs.
First rule: checking means prevention.
Before you commence cooperation with a new customer or sign a next contract with your regular customer, verify if they are solvent. How to do it? By analysing financial documents, monitoring information on trade portals, debt exchange or order a reliable report in a credit information agency. Read information about the customer and their payment habits in the Internet, shaping your own opinion among their business partners or suppliers.
Second rule: have everything in a paper form.
Taking care about proper order in documents is equally important from the perspective of receivable management. A VAT invoice is not everything! It only informs about the obligation to pay tax. Thus, you should also secure yourself additionally with a goods acceptance protocol, confirming the quantity and quality of the products received. Transparency, cohesion and completeness of documentation facilitates the process of receivable settlement if we meet with our customer on a court bench.
Third rule: they do not pay? I recover my debts.
Monitoring receivables is a necessity if you do not want to wake up with empty hands. React immediately if you experience delays in payments on part of your customer. Use relevant software to keep yourself informed about overdue invoices. Call, ask and demand payment – after all, this is your money! If you do not manage to do it personally, ask experienced debt collectors to do it for you.
Prevention, documentation and exercising vigilance constitute three pillars of proper cooperation among entrepreneurs. They will enable your business to avoid a close circle of debts which is hard to escape from.
Published on: 14 November 2016