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Twelve Tips for Receivables Management
- Create an incentive for your customers to pay promptly by offering a settlement discount (Skonto).
- If payment is still not made on time, be friendly but firm on the matter.
- Sending reminders is not a task for the boss. Have you assigned this task permanently to a member of staff? If not, do so immediately. As a business owner, you should be focusing on the development of your company.
- Always follow up on outstanding receivables. Organise a transparent dunning procedure that you follow consistently. Over time, your customers will become accustomed to the process and will know that you will enforce your claim. This measure alone will reduce the level of outstanding receivables over time.
- Build a dunning system, even if your business is small. Many small businesses have no defined process. Ensure that this process is known to both customers and staff.
- Act promptly! State a payment deadline in your invoices. Once it has passed, act! You have rendered your service; payment is now due to you. Send a polite reminder.
- If you have stated a payment deadline in your invoice, you are entitled to charge interest for late payment once the deadline has been exceeded.
- Speak with business partners who fail to pay your invoice even after a reminder - especially in long-standing business relationships with customers who otherwise always pay on time. Try to find out, for example, whether your customer is dissatisfied, whether they have a short-term liquidity problem, or whether there are signs of a lasting financial difficulty in their business.
- We advise you to apply for a court payment order (Mahnbescheid) after three reminders. You do not necessarily need a solicitor for this. The procedure is straightforward.
- Be persistent. If you cannot achieve anything yourself, you can instruct a solicitor.
- Take late payments and payment defaults into account when planning your cash flow. This will protect your business from unforeseen difficulties.
- Monitor the payment behaviour of your new customers. This information is important for assessing the business relationship.