Debt chasing add-ons to improve your cashflow. BaranovTV, Episode 74

Debt chasing isn’t a fun job, but it’s really important! In this episode I have two add-ons to your bookkeeping software that will make life MUCH easier. Find out more by watching the episode now!

Transcript:

Hi and welcome to another episode of BaranovTV, designed to demystify the world of accounts and tax and to help your business grow.

In this week’s episode, I wanted to talk about the fact that, a sale is only a sale, when the money for that sale and whether it’s a product, or a service, actually hits your bank account.

It’s really easy for us to be really focused on the front end of that sales process and we’re constantly looking for new leads and new customers, but what we need to make sure that we focus on, is actually seeing those sales through the final hoop, which is getting the money for them, into your bank account.

People tend, if they don’t pay their bills straight off, they can fall into one of three categories. Either, they’re a ‘I’ve forgotten to pay’ and they’re entirely genuine. They’re a ‘can’t pay’ in which case they don’t have the cash to actually pay you, for whatever you’ve supplied to them, or, they’re a ‘won’t pay’. There are different things that you can do, if they fall into that ‘won’t pay’ category where they’ve actually appointed you to provide them with whatever product, or service and then they’ve decided that, actually, they don’t want to pay for it.

So, what can you do?

Well, the first thing you need to think about, is actually educating your customers, that you do expect payment at the backend. And part of that, is the work you need to do at the front end.

You should have really good terms and conditions, that they sign, that actually ties them into paying and that are enforceable, ideally reviewed by a solicitor and enforceable at the backend, if they decide that they’re not going to pay and they drag their heels.

But really, today, we’re looking at those people in the first category and maybe into the second. People that just don’t remember that they’ve got that liability to you. It’s really easy to be so focused on the front end, that we forget that we need to be following up with these people, and just reminding them, normally, possibly several times, to actually get those funds through to you.

So, I wanted to recommend today, was that you look at two apps, that bolt-on to both Xero and QuickBooks, that will automate a lot of the initial stages of follow-up for you.

There is some setup with both of them, as you’d expect, as there would be if you employed somebody to do your telephone follow-up, or if you were chasing for funds. But once that tailoring and that setup process has been completed, both of them effectively automate as much of that process as you want them to.

The two apps that I’m talking about, are Debtor Daddy and also Chaser.

Both of them do similar functions. They both have a starting point, around about £25 per month. What you can do, is you can actually set both systems up so that you will send, automatically, reminders at key points, through the cycle, that you decide on, to your customers.

We used to use Debtor Daddy for debt chasing, in our last business, and it made a massive difference to our cash flow. Historically, we used to do a lot of telephone collections and we used to send lots and lots of emails, but it was very labour-intensive. What we found, was that by utilising Debtor Daddy, it took all of that front end work, out. They were automated reminders, that go out and you can set them up, so that they’re different voices, so you decide which category your customers fall into.

  • If it’s someone that you think is absolutely genuine, then they get a really soft approach and a soft voice, through the different templates.
  • If it’s somebody that is a repeat offender, then you might want to be a bit sterner.

And you can have, in both systems, you can have different voices and different sets of templates, that go out. And they can go out at different points.

Now, what we would recommend, for both of them, is that before the invoice falls due, that a reminder goes out, to say, ‘this is a copy of your invoice, remember, please, that your payment is due in seven days’, or whatever it might be. And then you’ve got subsequent follow-ups, after that.

Where the two systems differ, is that on Chaser, you can escalate, depending on which option you go for, you can escalate, so that your emails are seen to come from a different person. So, it could be a manager. It could be a director. And you can actually have them so that they go, automatically, to the person that you originally agreed the sale to and then you can escalate them, so that they go to their superior, too.

So, Chaser is slightly more tailor-able, but, either of them works really, really well, for those customers, that need, either, reminders, because they’re really busy and they’re a little bit disorganized, perhaps.

Also, it does start to impact, on those that are less likely and less inclined to pay you because it educates them, to say that you’re not going to forget about it, you are going to keep them on follow, you are going to keep reminding them and asking them for the money.

Part of the process of getting your cash in, is to educate clients, to make sure that, actually, they realise that they do need to pay you.

Beyond that, both systems enable you to free up some additional time, for whoever does your telephone collections, or your general collections, by taking away the easier debt chasing side of it and the day-to-day admin side of it, it frees that resource, to make sure that they’re on the phones and that they’re working the phones and they are going back to people that aren’t returning their messages and they are promptly saying, “Well you promised me you’d pay me by Friday and we haven’t had it. Now it’s Tuesday, what’s happening?”. And again, that’s an education process.

So, we would strongly recommend Debtor Daddy, or Chaser for debt chasing if you’re not able to move your clients over to something like GoCardless, where they’re paying you by direct debit.

As ever, if you would like to have a chat about either process, then do get in touch. That’s what we’re here to help you with. Or any other aspect of your cash flow, obviously, do please pick up the phone, drop us an email and we’d be happy to help.

I’ll leave you with those two. Do have a look at the two websites, and I’ll see you very soon.

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