“Should I give up, or should I just keep chasing pavements”
I’m not a huge fan of Adele’s music, but I misheard her lyrics (as I often do) the other day when driving home from my London practice.
Because they reminded me of something I hear all too often from practice owners:
“Rudi, my debtors are out of control, there’s £500k waiting to be collected and cash flow is only getting tighter. I feel like giving up!”
Now it’s understandable that having high debtors makes you feel like this because running a business on tight cash flow isn’t fun or easy.
You don’t have spare cash to invest in new team members, nothing to spare for marketing, there’s always a question about whether you can afford that piece of new software and you maybe don’t take enough out of the business for yourself.
Now I’m here to tell you giving up should not be an option, and there are simple strategies that you can use to reduce your debtors days and ease your mind.
By far the most ideal scenario would be to have every client set up on direct debit at the point of onboarding. This is really straight forward when using software like Practice Ignition and their built in Direct Debit solution.
But this isn’t so straight forward when you have historic debtors and clients who won’t make the jump to monthly direct debit right now…
In this scenario, you should consider these 7 points…
1. Offer an variety of payment methods
With historic debt built up from long term clients it isn’t always easy to get them onto direct debit.
So, we need to be a little flexible with how we ask for payment.
Offering a variety of ways to pay what’s outstanding makes it far more likely that they will do so.
Some options could be:
- Paying over the phone
- Paying in practice (card machine)
- Paying online (you can integrate xero with gocardless or stripe)
- Fee Funding (for those clients with similar cash flow issues who simply can’t afford to pay)
The more options you provide, the more convenient it will make it for them to pay up.
2. Choose a dedicated chaser
This is key.
If nobody is actively chasing your debtors for payments, then your chances of getting what’s owed will be slim to none.
So, choose someone to get on their heels.
This person should definitely not be you or any of your practice partners if you have them.
Your time can be much better spent elsewhere, and you’d risk tainting the relationship you’ve built with your clients.
When choosing your chaser, it’s important to think about the type of person for the job.
If they are a happy-go-lucky person who can’t be assertive when needed, then they are probably not up for the job.
If they’re friendly, driven, assertive and tenacious…well you’re onto a winner. As long as they have the time each week to regularly chase and keep on top of things.
If you haven’t got someone in your practice suitable to do this, then this next point might be useful.
3. Outsource your credit control
If you have a team of friendly, smiling and easy-going individuals then your team sounds awesome…
But if they cannot be assertive when necessary you will probably need someone else to be your debtors hound dog.
There are many UK based credit controllers available to work with, who can work for you part-time and for a relatively low hourly rate. You can find them on freelancing sites such as People Per Hour.
The sole purpose of these individuals will be to chase debtors so they won’t get distracted when a client calls up with a query.
And their lack of personal ties to your clients will mean they get the job done effectively and without hesitation.
I myself, and many of my clients work with Wendy at CreditChase UK.
4. Have regular debtors meetings
You cannot solve a problem if you aren’t fully aware of the situation.
And one way of fixing the issue is by spending more time addressing it.
Each week sit down with your credit controller (or do a video call if they’re remote) and review your aged receivables.
By regularly setting aside this time to look at your debtors, you’ll have a clearer understanding of what action steps need to be taken.
And you are also far more likely to spot trends and patterns in client behaviour that could help prevent problems arising or debt escalating.
5. Be clear up front
Now I can almost hear you sarcastically saying, “Rudi, hindsight’s a wonderful thing!”
But if your clients weren’t given clear, up-front instructions for payment then they may not be aware of your expectations.
Which is why you should clarify, confirm and clarify some more, the payment terms of your services.
This way, any future work you do for your clients and any new clients know exactly what’s due and by when.
As with any task or project, the ‘Who, What, When Triangle’ principle can be applied here.
When telling customers your payment terms you must establish:
Who: Who’s doing the work and who is paying
What: What the work is and what the cost will be
When: When the work will be complete and when payment is due.
If all three are clear from the start, then you will be far less likely to encounter payment problems down the line.
6. Offer incentives
If you’re really struggling, it might be worth considering incentives for those who pay upfront or regularly.
Whether this be discounts for payments up front, or rewards for loyalty and regular payments it could have a big impact on reducing your debtors.
When thinking of incentives however, make sure the benefits outweigh the cost and you aren’t selling yourself short.
7. Reminder systems
We all forget sometimes, we’re human.
And sometimes clients just simply forget. So, having a system in place to remind clients can be really useful.
Or another option is Chaser. Chaser can automate the email reminder service to provide consistent credit chasing while maintaining a personal touch.
As mentioned before, the best means of reducing debtors is getting all clients onto a direct debit system.
This way they’ll not only know when they’re paying, but how much they are due to pay too.
If you’re despairing over the amount of money owed by debtors – then you need to take action and follow some of the steps above.
Having positive cash flow will open up many opportunities for your practice.
You’ll be able to invest in the very best A+ team members, invest in marketing for growth, explore exciting new software and take more money out of the business to give yourself the lifestyle you truly want.