The importance of successful marketing and selling cannot be underestimated, but it is of equal importance to be paid when you have fought so hard for the business.
Chasing up late-paying clients is probably one of the most dreaded administrative tasks any businessperson has to perform. Unfortunately, some clients see no need to pay, or will create disputes over their bills that will never be resolved unless you insist on payment.
Accounting firms have a tendency to go easy on their clients or adjust their debt chasing policy according to each client. There is nothing wrong with this approach if you are not looking to improve your cash flow position. However, as most of us are, developing a debt management policy – and making sure your colleagues and partners stick to it – is essential.
As with any other policy, it is best put in writing. You should include the following elements:
When an invoice is considered overdue
60 days is common in the accounting world. Your letter of engagement should state your payment terms, so that clients have a clear understanding of your policy from the outset. State on your invoices that the amount is due within 60 days of the invoice. Consider offering a small discount to clients who pay within 10 days. For new clients or annual invoicing, it is wise to call the client just after you have sent the invoice, both to ensure that it has been received and to answer any questions they might have.
A ‘good guy, bad guy’ approach can be very effective, making the managing partner the ‘bad guy’. Alternatively, someone in administration can deal with chasing up debts, thereby keeping the partner(s) at a distance, and allowing them to maintain a ‘good guy’ status. You should also include a clause in your policy that deals with whether, and when, you will charge interest on late payments.
Accepting partial payment
Some money is better than none, so partial payment can be a good alternative, as long as you have a clear plan for taking payment of the outstanding sum. Set a maximum settlement period for the sum overdue, and if you do arrange for the client to make payments in instalments, obtain written agreement to that effect.
Whatever your policy, it must be supported unanimously by every partner, or it will not succeed.
The managing partner should put rules in place so that work can be billed quickly. Ensure that partners are prompt in supplying the details needed to prepare invoices. Emailing invoices can also be an effective way of speeding up the payment process.