Do you struggle with customers who haven’t paid when they should’ve done?
James Brooker
Strategic Business Manager, LoveAdmin
Do your customers or members cancel their direct debits without any warning? How much of your monthly income are you chasing to claw back at the end of each month from people that haven’t paid when they should?
This is a common problem amongst organisations, and there’s a way to make it better. We’ll give you the tools you need to be able to proactively manage the amount you’re owed past its due date to help give you a clean bill of financial health.
What are aged receivables?
It’s a term that instantly confuses anyone without an accounting degree, but in simple terms, it’s a breakdown of how much your customer owes you, on a scale of how long it’s been since they were meant to pay. LoveAdmin’s timesaving software will give you all this information in an easy-to-read report, the Aged Receivables report. This report will track your top offenders, the ones don’t pay on time, and have fees racking up from several months prior.
Why do aged receivables matter?
Your aged receivables matter a lot. Think of them like a health check for the finances of your organisation. Any money sat in there is not where it should be, in your bank account. It can also suggest a cultural problem where your customers don’t feel the need to pay promptly, and there may be little consequence for not paying on time or having their details set up correctly for direct debits.
To put it into perspective, have you ever missed a credit card bill, or your council tax? You can be sure that within a matter of days you’ll be receiving increasingly urgent communication to make sure that you pay the bill. Those organisations obsess over their aged receivables because they’re crucial to their day-to-day operations, so they can’t afford to be relaxed around people owing money for an extended period.
Whilst that is the extreme end of the spectrum, and we don’t recommend sending emails or text messages within hours of a customer not paying their monthly membership, the principle of tracking what you’re owed religiously remains. It’s your money after all.
How do I deal with them then?
Now we’ve established just how important these can be to the running of your organisation, let’s pick apart how we can deal with them in a productive way. LoveAdmin’s Aged Receivable report is the best place to start. Here, as we’ve discussed, you get a clear view on who owes what, and how long they’ve owed it for.
- The best place to start is with debts that have been outstanding the longest, as these are the least likely to get paid without you getting involved
- For recurring payments (your direct debits) the next thing to do is to check whether their direct debit mandate is still active but don’t worry, LoveAdmin has got a report to tell you that too
- If they do have an active mandate, this is excellent news! You’ll then be able to find the invoice for that customer and select the button to collect the payment and the system will do all the work
- If they don’t have an active direct debit mandate, you’ll be able to email them from within the LoveAdmin system to remind them to set up a direct debit, and to get them to pay what they owe
- If you’ve got a lot to do, focus on your biggest debts that are the most overdue and once they’re cleared, start working your way down until you’ve got nothing outstanding over 30 days
Preventing bad habits starting again
With a robust process in place, you’ll start to see the amount of money trapped in this bucket will start to go down. However, it’s also important to put measures in place to stop repeat offenders. You can do that through giving consequences to non-payers. This may sound overly harsh but done right, you’ll find that the number of your customers that are frequent flyers in your report will start to go down.
Think back to the example we gave earlier, the credit card company and your local council have lots of things they do to make sure you pay, all the way up to the extreme of calling in the bailiffs. Now whilst we don’t suggest that course of action, a simple strategy of not allowing customers to take part in activities or enter your organisation until their debts over 30 days are settled will certainly sharpen their focus and make sure that their bills are paid on time.
Remember, your revenue is what keeps your organisation’s lights on, it’s worth having a few difficult conversations to make sure you’re getting the revenue you’re owed. Once you’ve got your process set up, and you communicate your process clearly to your customers, your days of despairing over missing money will be a distant memory.
Would you like more personalised commercial advice and business partnering to unlock the potential in your organisation? Customers can reach out to James Brooker, Strategic Business Manager at LoveAdmin, who can support you at no extra cost. Book a call now at calendly.com/loveadminjb.
If you’re not a LoveAdmin customer yet, but are ready to transform your payments, one of our experts will be happy to have a quick consultation to get you on your way – Book a demo
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