Every business faces the challenge of collecting payment from non-paying clients and customers. This can have the potential to ruin your business, since you can’t always pay your own bills when you are waiting on money that never seems to be coming. Not to mention that it also prevents you from gaining that bit of extra money to allow your company to grow and expand. As such, a successful business will usually have an effective credit management process in place, which concerns the accounts receivable section of a business’ balance sheet.

Accounts receivable, also known as trade debtors, are the outstanding amounts owed to an entity by its clients. An account receivable comes about when goods or services are sold to clients on the basis of credit. Under the credit system, a client is given a certain time frame in which the account has to be paid. Accounts receivable represent a current asset in the balance sheet, as they signify the future right to receive cash, and are a central asset to any business. If the receipt of accounts receivable funds are not handled efficiently and accurately, problems such as profit declines and cash flow shortages can arise. Some controls which you may put in place over accounts receivable include:

•   Establish collection and credit policies in writing and ensure your staff and clients are clear on the details.
•   Complete credit checks on all new prospective clients applying for credit.
•   Frequently age your accounts, and get an independent examination of the report.
•   Go over the credit transactions and write-off bad debts.
•   Ensure the policies are carried out for the following-up of accounts that are overdue.
•   Settle trial balances with general ledger accounts.

Although sometimes, despite how hard you try to do the right thing and receive what is rightfully yours, the client still won’t budge. There are many excuses clients may provide to put off paying their account; however there are a few ways you can combat this:

1.   From the beginning of your relationship with the client make your trading terms clear in writing and strictly enforce them. This will prevent the client from being able to claim they didn’t believe the account was due.

2.   Should a customer tell you that they haven’t yet received the invoice from you, fax or email it to them straight away. As soon as you have sent it, call the client straight away to confirm, so there can not be any further disputes about this. Do not wait and mail it in the post.

3.   If you keep trying to call a client to follow up an overdue bill, and the person who handles the accounts is always conveniently unavailable, there are a few things you can do. You can try calling them at the beginning or end of the day, or alternatively call up through another department and ask to be transferred through.

4.   Should the client require a purchase order number, do your best to supply it immediately in order to prevent further time wasting. Also if the client is disputing the invoice amount, contact the person who ordered your product or services immediately to address any concerns or clarify details.

Inevitably, there will usually be that one client who doesn’t pay and continues to make up excuses that you know are untrue. If you have exhausted all of the above solutions then you are well within your rights to take legal action against the non-paying client. It is important to seek professional advice when taking legal action. A lawyer will be able to assist you with all stages of this process – from issuing a statutory demand letter, to holding a court case.

Here at The Quinn Group our experienced team of lawyers and accountants are able to assist you in managing your accounts receivables. Our accountants can assist with your general cash flow issues or other accounting needs, and our lawyers can assist you to recover your money through legal action. For more information submit an online enquiry or call us on 1300 QUINNS (784 667) or on +61 2 9223 9166 to book an appointment.