Five simple tips for ensuring constant cash flow
Companies exist to earn money and make a contribution to society. They get money in return for providing products or services to their customers. The money is then used to further invest in making better products or providing more comprehensive services and to expand their client base. But what happens if customers pay late or not at all for the goods and services they received? Companies have been suffering as a result of the negative payment behaviour of their customers and contracting parties for many years. The credit management department have just had to grin and bear it. Each year, billions of euros are written off by companies due to bad payment behaviour. But how can we resolve this issue? According to Stephan Schoon, VP Customer Success at Onguard, it is important to encourage customers to pay their accounts on time. He offers five simple tips that can be implemented right away and which will deliver significant and immediate results.
1. Set out payment conditions in black and white
It is important to set out payment conditions in writing. Make sure that the conditions are accessible for everyone, including the organisation’s employees. ‘Debtors are often fully aware of what they have to pay but if it’s not written out, the organisation has nothing to fall back on. Setting out conditions in writing makes them definitive and creates a clear and consistent approach’, explains Stephan.
2. Stimulate positive payment behaviour
Research has shown that rewarding negative behaviour has little impact. For example, imagine an employee whose only feedback is negative. The employee feels undervalued and his performance will suffer as a result. If the employee receives compliments about his good behaviour, he will continue to demonstrate this type of behaviour. Try the same tactic in regards to customers and reward positive payment behaviour. For example, give the customer a discount for their next purchase. The customer will feel valued and return for more. This will increase turnover.
3. Send the invoice immediately after delivery
Invoices are often sent out in monthly batches, which in theory sounds ideal. However, in practice, it results in invoices being paid later than if they’d been sent immediately after delivery. Sending invoices immediately also benefits companies by ensuring a constant flow of cash coming in.
4. Keep in touch with debtors
‘Strike while the iron is hot’, advises Stephan. ‘Make direct contact with the customer if he has not paid the invoice. This ensures that the level of urgency remains high.’ If you don’t make immediate contact with the customer, it implies that the company doesn’t need the money urgently.
5. Use the right tool
Credit management is all about having a clear overview and a streamlined process. In order to streamline the Order to Cash process, it is vital to use the right software. Specialised software is much more advanced than the often used spreadsheet. ‘In spreadsheets, the quantities of data, data-entry errors and formula changes can quickly lead to problems’, explains Stephan. Processes such as direct invoicing after delivery, cannot be realised with spreadsheets. Special credit management software is a great solution in this context. When processes are automated, there is plenty of time for making contact with non-paying customers, for example, and rewarding paying customers for their positive behaviour.
In short, these small modifications recommended by Stephan Schoon could lead to huge changes within your organisation. The number of invoices paid on time will increase, you will easily reduce the DSO and customers will return for more goods/services. If you need a way to expand your ERP system and make it more suitable for the Order to Cash process, Onguard offers the ideal solution. Our credit management software is intended to improve the accuracy and efficiency of various tasks. This enhances performance, reduces DSO and optimises cash flow. You can use the software in combination with an ERP system to get even more from your IT facilities.
“Quality is when we achieve the customer’s expectation. But we are trying to create a service aptitude that we recognize opportunities to exceed the customer’s expectations.” STEPHAN SCHOON – VP Customer Success