Positive debtor-creditor relationships can be difficult to maintain.
You’re dealing with people, and people aren’t always going to be perfect. Delayed payments or a total failure to pay are obviously some of the more common issues. Strained or damaged relations as a result of chasing payments can be a less obvious side effect, but a harmful one nonetheless.
You’re not always going to have debtors honouring the terms of trade. In fact, according to legal software provider FILE PRO, the average time for payments to law firms in Australia is generally four times slower than the agreed terms of trade.
Ensuring positive debtor-creditor relationships can be difficult, but it doesn’t have to be impossible. Below are three ways to help get paid on time while maintaining positive relations.
1. Take advantage of credit reports
A credit report is a detailed summary of an individual’s credits, repayment history and the status of active accounts.
These reports grant access to an individual’s financial history, such as whether or not they still owe money to their previous lawyer, or if they have other outstanding debts. Accessing this information can be a means to filter your potential clients pre-emptively, and avoid transacting with those who seem financially unreliable.
Though credit reports are not free, spending those first few dollars initially could save you a lot of time and money in the long run.
2. Communicate, communicate, communicate
It can’t be said enough: communication is of paramount importance when it comes to dealing with debtors.
Clearly communicating the terms of your repayment schedule, and the consequences of late repayments, will grant your clients a clear understanding of how to comply your terms, and avoid any penalties.
Going as far as to implement a communication schedule – and communicate this schedule to your clients – can also help you to keep your debtors organised. For example, if you let your debtor know that you’ll call on a fortnightly basis to ensure their case is on track and there are no issues with repayments, they’ll be more likely to be prepared.
3. Offer a range of payment options
Of course, you want to be paid. So, help your clients pay you.
You may find that some payment methods such as cash will appeal more to some, while others may prefer cheque or credit card. Offering a range of payment options can be a great way to show your debtors that you’re flexible, and willing to transact under their terms.
Most firms offer credit card, cash, cheque and direct debit payment options. However, there are a number of new payment options becoming available that could make the process even easier.
One example is to offer your clients a more manageable monthly repayment schedule. When this option is provided by an external source, it is called “professional fee funding”. Professional fee funding allows your firm to be paid in full within days of the client receiving their invoice. This can be a great way to offer your client extra flexibility, escape potential payment complications, and maintain predictable cash flow.
Bruce Coombes is CEO and founder of QuickFee, a provider of professional fee funding to legal and accounting organisations across Australia.