Did you know you still have to pay tax on uncollected debtors?
Yep, that’s right! Even if you haven’t received the cash, tax is based on your sales figures, not whether the money’s in your bank account.
To help you keep your hard-earned money where it belongs – in your bank – here are some simple, effective debt collection strategies you can implement right now:
Set clear payment terms upfront. Agree on them at the time of sale.
Get your Terms of Trade signed. Make sure everything is agreed upon before you start the job.
Include a guarantee in the payment terms. This holds customers accountable.
Ask for a deposit. It reduces your risk and shows commitment.
Invoice quickly. The sooner you send it, the better.
Revise your payment terms. Consider making them 7 days or ‘on delivery’.
Send statements with only two columns. Current and OVERDUE — keep it clear and simple.
Schedule overdue reminders. Don’t wait – follow up the day after the due date. You can automate this in Xero.
Appoint someone else to handle collections. Owners are often too soft on customers.
Document promises. If a customer commits to paying, make sure it’s in writing and stick to it.
Use a debt collector sooner. Don’t wait too long – the longer you leave it, the harder it gets.
Stop credit for late payers. If they’re not paying on time, don’t keep offering credit.
Take action now!
Take a moment to think about how many of these strategies you’ve already put in place in your business. If you’re not actively using them, now’s the time to start. Don’t let procrastination put your business at risk — tackle your debtors today!
As the saying goes, “It’s the squeaky wheel that gets the oil.” – Anon
