Getting Paid Promptly
Businesses
fail because cash going out exceeds cash coming in.
One secret of managing this is to
understand how the customers to whom
you allow credit actually process your invoice.
Not every buyer does things the way you expect. Each of them will have their own processes
designed around their particular
needs and way of doing business. The
larger organisations design their processes around efficiency - to do things with the least possible wastage to
themselves.
This way of doing things may not always
coincide with how you want to do
things, but often people learn too late.
So, when signing up a new buyer to whom you
will extend credit, ask the following questions:
What
information do you need on invoices?
You want to make it as easy as possible for
them to pay you. Invoices usually
include a description of the goods or services and the amount payable, but does
your buyer need, for example, to see their Purchase Order number on the top
line? If this is missing, there will be
a delay whilst they try to reconcile it, or call you and ask to which PO it
refers. What does your contract with them say?
Is
any other documentation needed with the invoice?
Do you, for example, need to attach copies
of receipts for delivery of goods or services signed by the recipient to prove
that they were delivered? Is a copy of
the buyer’s original PO required?
To
whom should invoices be sent?
Do you leave the invoice with the person
who receives the goods, or should they be sent direct to the finance department
for the attention of a particular person or section? Misdirected invoices will only add to delays
in receiving payments whilst you chase things down.
How
does the buyer process invoices?
Do they pay them as received, or do they
batch them all up to be paid at the end of the month? In this case, if you send an invoice at the
beginning of the month and the buyer won’t process it until the end, that’s an
extra 30 days that you’ll have to wait.
How many individuals are in the chain that processes them? How long does it take to process a payment
assuming all documentation is in order?
How
will they pay?
Cheque or bank transfer? How many signatures are needed on cheques or
transfer authorisations? Does this change
depending on the amount to be paid? If
they pay by sending cheques through the post, you will have delays whilst the
post reaches you, you receive the cheque and match it against your records,
take it to your bank and pay it in, and then wait for payment to be
cleared. This can add up to 10 days.
In
the event of a dispute, what’s the resolution process?
If a buyer disagrees with an invoice, you
need to know as soon as possible what the issue is and who on the buyer’s side
is responsible for it and has the authority to authorise payment.
Some buyers may wonder why you’re asking
these questions (and even resent it).
The answer is simple: you want to make their life as easy as possible so
that you can meet your obligations under your service contract (if there is
one). Noone benefits if you don’t fully
understand how your buyer works.
Labels: Customer Care, Financial, Risk, Strategy
posted by William Martin @ 09:03
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