Listed in: Finance & tax

Tips for collecting your money faster

If you offer credit to your customers, follow our four steps to help reduce the chances of late or non-payment and speed up your cash cycle.

3 minute read

In an ideal world, you’d have customers paying on time, every time. But when delivery times can be uncertain, there are cash flow or other problems, this isn’t always the case.

Read on for a number of steps you can take before and after you give credit, to help you have fewer overdue accounts and headaches each month.

Step 1. Make your terms of trade clear

Set up your terms of trade so your customer’s clear around invoice expectations. This can include things like:

be specific when payments are due (immediately, 7 days, 30 days)
state late payment fees
outline your deposit policy and any refunds
provide a direct contact for any queries
describe the conditions for return.

Every business has its own way of working, so it’s a good idea to get help setting up your terms of trade.

Step 2. Set credit limits and rules

When choosing which business to give credit to, it’s worth having some rules in place for both yourself and staff – for extra peace of mind.

To reduce any credit risk, it’s a good idea to:

set a credit limit minimum so you’re not wasting time with small purchases
set a credit maximum so if the payment is late, you’ve controlled the most that will be due
research the customers’ credibility (well-known company vs. a new start-up)
ask for credit referees and call them to check their payment history
apply the same rules to friends and family to avoid unpleasant conversations later.

There are a few other giveaways that might indicate a tricky customer, for example they place a small order, pay on time but then follow it up with a large order that remains unpaid.

Step 3. Speed up the cash cycle

You could reduce the time it takes to receive payments – like short circuit giving credit in the first place by offering immediate payment options. For example, allowing a customer to pay by credit card means you get the cash immediately, and they have 30 or more days to repay their credit provider. The credit card fee could also be worth the hassle of sending invoices.

You can also offer direct credit, internet banking, or mobile payment options. BNZ PayClip** lets you process payments from your phone after the job has been completed, plus you can send customer receipts by email or text.

Other ways to help speed up the flow of cash are:

switch to cash payments
use shorter credit terms (7 days not 30 days)
incentivise early payment by offering discounts or special deals
ask for pre-payments or deposits.

Whatever you can do to avoid giving lengthy credit terms will most likely be worthwhile.

Step 4. Be firm but fair with late payers

It’s important to keep a close eye on how much you’re owed as historic overdue balances can make it harder for both you and your customer to manage.

You could consider using accounting software to help you find out exactly what’s owed (Xero, MYOB, or WAVE are three commonly used accounting solutions) or use debt collection apps.

If you do experience regular late payments then you could consider:

using automated reminders inside your accounting software
setting up a monthly report telling you who’s late
thinking about cancelling credit for those who are repeat offenders
taking fast collection action if you perceive a risk of non-payment.

If you’re offering credit, there are things you can do to help reduce the pain of chasing customers for money, or worst-case scenario, having to write off a bad debt. Ultimately, it’s worth having plans in place to protect your business.

Raising cash quickly during a cash flow crisis

If your business experiences a downturn or financial crisis, you may need to raise money fast. Here are some ways you could help increase cash flow.

Tips to help reduce your cash ‘burn rate’

Help take control of your business during a crisis by working out how much cash you have left. If you know when you’ll have zero cash, you can prioritise your next steps.

Related tools

Business plan template (PDF 596KB)

Financial performance plan (PDF 36KB)

**Standard PayClip Terms and Conditions apply. Subject to credit criteria and merchant services terms and conditions.

References to third party websites are provided for your convenience only. BNZ accepts no responsibility for the availability or content of such websites.

This material is for general information purposes only and does not constitute, and is not intended and is not intended as, personalised financial, legal or tax advice. No representation or warranty is made to the accuracy, reliability or completeness of any statement in this article. BNZ strongly recommends you seek advice specific to your personal financial, legal or tax situation from a qualified adviser. Neither BNZ nor any person involved in the material accepts any liability for any direct or indirect loss or damage arising out of the use of, or reliance on, all or any part of the content.