28th June 2023| Jenny Esau | News and Advice, Training
What advice can you give me with regards to asking for money? I’m sure I’m owed lots of money but I send so many invoices, that it is becoming increasingly hard to chase them all?
The trick is to know how to plan invoice collection. Use the Pareto Principle (80-20 rule); that is, often 20% of your customers will account for 80% of the overall money owed to you.
Prioritise
Focus on calling your customers based on the invoices with the highest value. There is simple reasoning behind this, you will get more money paid to you for your one call. Ensure you have all information ready prior to this call so that any questions that pop up during your conversation can be answered straight away, avoiding delays to you in getting paid. Preparation beforehand will also increase your confidence in handling the call by having adequate knowledge of the situation to be able to discuss a solution; don’t end a conversation without plans for a follow up call if the issue is not resolved from the first call.
For smaller value invoices, use a letter or email cycle to collect payments. Most accounts software has the facility to set up an automatic letter cycle, to send three letters out with a pre-determined time gap in between. Click to see our tips on how to produce effective collection letters.
In all cases, call the client prior to sending a final demand to ensure you have sent any letters to the correct address and potentially rescue a business relationship before any court action is taken.
Plan
Set aside time each week in which to focus on your payment collections.
Everyone will plan their week differently but by ensuring you have set aside time to: take stock of all payments due, make calls, send emails as well as writing and sending your collection letters, you will find that you can keep track of which customers you need to chase much more easily. You need to remain flexible to return calls when agreed or when the finance contact is available.
Author: Jenny Esau
Jenny is the Managing Director of Credit Management Group UK, with 35 years' experience in credit management, a Fellow of the Chartered Institute of Credit Management (CICM) and former Chair of the Merseyside and North Wales branch of the CICM.
As an enthusiast with a profound understanding of credit management, I bring to the table a wealth of knowledge and practical expertise in navigating the intricate landscape of financial transactions and debt collection. With a knowledge base rooted in years of hands-on experience, I can confidently dissect the advice provided in the article by Jenny Esau, the Managing Director of Credit Management Group UK, published on June 28, 2023.
1. Pareto Principle (80-20 Rule): Jenny wisely advocates for the application of the Pareto Principle in invoice collection. Drawing from the 80-20 rule, she suggests that focusing on the top 20% of customers who contribute to 80% of the overall money owed can significantly enhance the efficiency of the collection process. This strategic approach helps prioritize efforts and resources where they matter most.
2. Prioritization: Emphasizing the importance of prioritization, the article suggests concentrating efforts on customers with the highest invoice values. By doing so, the aim is to maximize returns with minimal effort, streamlining the collection process for better outcomes. Jenny underscores the need for thorough preparation before contacting clients to ensure swift and effective resolution during the call.
3. Communication Strategy for Smaller Invoices: For smaller value invoices, the article recommends employing a different communication strategy. Utilizing a letter or email cycle, preferably automated through accounting software, allows for systematic and consistent follow-ups. This method ensures that even lower-value invoices receive due attention without overwhelming the collector's time.
4. Personalized Client Contact: The advice to call clients before sending a final demand is a strategic move to confirm the accuracy of contact information and potentially salvage the business relationship. This personalized contact adds a human touch to the collection process and may prevent the escalation of matters to legal action.
5. Time Management: The article stresses the significance of planning and allocating dedicated time each week for payment collections. This proactive approach enables collectors to stay on top of pending payments, make necessary calls, send emails, and manage the overall collection process efficiently. Flexibility in returning calls as agreed upon is highlighted as a crucial element in effective time management.
6. Author's Background: Jenny Esau's credentials as the Managing Director of Credit Management Group UK, with 35 years of experience in credit management, a fellowship with the Chartered Institute of Credit Management (CICM), and a former Chair of the Merseyside and North Wales branch of the CICM, further bolster the credibility of the advice provided. Her extensive experience in the field adds weight to the practicality and effectiveness of the strategies outlined in the article.
In conclusion, the amalgamation of the Pareto Principle, prioritization, tailored communication strategies, personalized client contact, effective time management, and the author's expertise collectively form a robust framework for optimizing invoice collection processes in the realm of credit management.
