Did you know you still have to pay tax on uncollected debtors? This is because you pay tax on your sales figures irrespective of whether you have collected the cash.
To avoid paying tax on uncollected debt, here are some quick and easy-to-implement debt collection strategies to ensure your hard-earned money is sitting in your bank account (and not in theirs):
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- Agree on your payment terms at the time of sale
- Get the Terms of Trade signed off in writing before you start the job
- Include a guarantee in the payment terms
- Ask for a deposit
- Invoice as quickly as you can
- Change your payment terms to 7 days or ‘on delivery’
- Send statements with only two columns – current and OVERDUE
- Schedule overdue reminders and follow up the day after the due date
- Put someone other than the business owner in charge of collection – owners are usually too soft!
- Document what your customers have promised in terms of payment and hold them to it
- Use a debt collector sooner rather than later – the longer you leave it, the harder the debt will be to collect
- Stop credit for customers who are late on payment
Take action! Reflect on how many of these ideas you’ve integrated into your business and check how many you’re actively applying. Don’t let procrastination hold you back — address your debtors today!
The following content was originally published by BOMA. We have updated some of this article for our readers.