Article D&B Credit

Customers do not pay their invoices: With these 9 tips you will get your money

19 Feb 2018

Encourage or threaten? Carrot or stick? If a customer is not pay your invoice, there are many ways to help a little bit. But not for all of them reminders, debt enforcement or psychological tricks are working. In this article you will find the 9 best tips on how to get your money.

Die Rolle des CFO verändert sich.

  

The work is done and delivered, the invoice is written and sent. Now the big frustration - the customer is not paying. That's unpleasant. Defaulting payers may even pose a real risk to the existence of small or medium-sized enterprises. If the liquid funds for the staff or for investments are lacking, it is often getting serious.

But it does not have to come that far. Structure your accounting. Check the customer's payment history before concluding a transaction. Make the payment of the invoice as easy as possible and even reward an early payment with a discount. If the money is not coming, then increase the pressure continuously.

What this looks like in detail is revealed in the following 9 tips and tricks.

1. Send the correct invoice

Make sure that the invoice contains all the necessary information and that these details are correct. In detail these are the name and address of the supplier and the recipient, the delivery date, a detailed description of the delivery or service, the price and the VAT amount. If you send the invoice electronically, then be sure to insert a digital signature. If your customer receives a formally and substantively correct invoice, it will be much easier for him to pay it and he will also save time which would be needed for unnecessary and time-consuming queries.

2. Offer different forms of payment

Make it as easy as possible for the customer to transfer the money. Offer various forms of payment such as invoice, direct transfer or PayPal. In Switzerland, the good old payment slip is still by far the most popular. Nevertheless, ask your customers whether they prefer a different method of payment.

3. Agree payment deadlines

The Swiss Code of Obligations does not regulate these. There the principle "goods for money" still applies. If you grant the customer a payment term, you principally grant him a supplier credit.

4. Work with psychological tricks

"Nine out of ten people pay their taxes within the deadline". The British Tax Authority prints this simple sentence on the tax letters. Actually an inconspicuous and almost ridiculously simple measure, nevertheless it achieves a tremendous effect. The payment rate improved from 30% to 35% and the tax collector's office received additional hundreds of millions of pounds. This little psychological trick is that effective as it appeals to people's honesty instead of threatening them.

5. Grant a discount

Reward those who pay early with a small discount. In Switzerland, 5% is usual for immediate or cash payment, 2% in the first 10 days and 1% until the 20th day.

6. Work for money

If one of your customers is a defaulting payer, then you can simply retain the work or a part of it. After all, you also have to pay for the material and personnel.

7. Search for a conversation

All attempts to persuade the customer to pay have not worked, there was no response to your reminders. The next step would be the collection. But before starting it you should search for a personal conversation with the customer. While reminders can simply be put away or ignored, the customer has to face a personal conversation. Create a certain pressure and discuss the available options. If the customer promises to pay the open amount, then ask for a written confirmation. The personal conversation is also the opportunity to talk about installments or an extension to the deadline. In this way you spare the customer from a collection procedure and save high fees.

8. Remind your customers

Reminders are not regulated by law in Switzerland. As an entrepreneur, you decide on your own, when and how often you remind your customers. The form is completely up to you. It does not necessarily need to be a letter. Email, phone call, verbal conversations or via SMS are also valid options. Send the first reminder ten days after the expiration of the original payment term, the second and third each 20 days after expiry of the time limit of the previous reminder. Important: Threaten with consequences and enforce them. If you do not do this, companies will not take you seriously anymore.

9. Learn from your experiences

If a company pays one or two times not within the agreed term, then that is an indication that it will continuously pay delayed in future. If you have a tight cash balance, then make no business with poor payers. Another options is to check the creditworthiness of this company.

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