1. Comprehensive Contract
A comprehensive contract protects you and your clients. Your business contract should be the cornerstone of your credit management system. It serves as proof that you and your clients have an agreement on the fees chargeable. As such, your contract should cover as much ground as possible. Some of the components to include are terms of trade, terms of termination, warranties, payment methods, administration fees, service fees, and security deposits. It is good practice to collect 25-50% of your invoice as a deposit, upon acceptance of your quote. Remember to put any service variations in writing; this provides a good premise if you need a debt collector.
2. Establish a Collection Process
A precise yet straightforward collection process alleviates the stress of accounts receivable management. It should follow a timeline that falls within a reasonable timeframe.
Your collection process should have three mandatory stages. First, decide when to deliver your invoice. Invoicing should always be prompt, right after you complete your service. When the value of your service is most appreciated, that motivates your client to pay. Next, set your payment due date. Your invoice should include this, as it encourages your client to pay on time. Finally, determine the steps to take when an amount is a past due. Some possible solutions are imposing a late fee penalty, or passing outstanding accounts to a debt collector. It is crucial to act early on your debts owed, and having a practical process in place ensures that.
3. Embrace Technology
As a 21st century tradesman, embrace the prevalence of technology and make it work for you. Technology can lessen the distance between you and your clients. A website or social media page makes it easier for clients to make contact or check availability. It also provides a feedback avenue to enhance client satisfaction. Having mobile merchant facilities makes paying simple, and can improve collection.
Make use of web and mobile applications available to save time on paperwork. After all, time is a capital for tradesmen and can be better used to service more clients. Apply technology to tasks like bookkeeping to make work more efficient. One benefit of using mobile applications is that you will have your work at your fingertips. When there are disputes or inquiries, you can then resolve them immediately.
4. Understand Your Cashflow
You should review your cash flow regularly to have a good grasp of your financial standing and help in the strategic allocation of your time and resources. Should you spend time chasing debts, or scheduling more jobs? Should you cut down on spending, or is it time to upgrade your tools?
Every stage of your career varies. Your finances can be a good indicator of your progress direction.
5. Know The Law
Laws and regulations may seem like a hassle, but they can also be your best safeguard. For instance, if your work on a property is substantial, you can lodge an equitable caveat against the delinquent owner, this prevents the owner from selling or leasing.