Good cash flow is essential for the success of your business. To get paid on time, don’t let unpaid invoices and debts build up.
In an ideal world, you’d get paid as soon as you sold your goods and services or sent an invoice. But in the real world, sometimes you have to chase payment.
It’s important to keep talking to customers who haven’t paid. There may be a simple reason, eg if you haven’t automated your invoicing, you may have forgotten to send one.
If invoices aren’t paid on time:
When you talk to your customer, you may find they’re having financial difficulties. Think about letting them pay in installments.
The District Court can order people to pay their debts. But remember, legal action is costly and takes time. You can make a claim at the Disputes Tribunal if there’s a disagreement about goods, services or invoicing. But the tribunal isn’t a debt collection agency, so it’s not the place to go if your client is not paying up.
Another option is to use a debt collection agency. Their fees vary, so shop around.
If someone who owes you money is in financial stress, you’ll probably notice changes to their payment patterns, says Anna Chartres of Christchurch law firm Lane Neave.
“They’ll be deviating from your standard credit terms and conditions which they may have previously complied with. You might see that they are slow on payments, you have cheques which are being dishonoured, and that’s an early indication that something might be awry,” she says.
“Make sure you have terms and conditions of trade in place. If you’re supplying goods, it’s a good idea to grant a security over those goods and say that title in the goods — the actual ownership of the goods — doesn’t pass until you have been paid.”