September 15, 2018

Making Payment Collections PAINLESS

Top 8 Tips in Invoice Payment Collection

Working in a company that collects invoice receivable payments can give you a unique insight on a supplier’s first hand experience in dealing with delayed payments.


You see so much emotion attached to that piece of paper. A stranger might not take second look but to the hardworking business man, an invoice represents so much more than just a piece of paper — it represents the fruits of their labor, their minds, their creativity, the big leap in achieving their goals. Delayed and inconsistent invoice payments takes the SME into a financial and emotional roller-coaster.


Unfortunately, most suppliers, when faced with a difficult client usually stay unassertive in order to keep their relationship with their clients. Suppliers have less bargaining power because of the need to grow their business. But you don’t always have to be part of the status quo.


Follow KyoPay’s 8 strategies and see what you can do to ease the difficulty in collecting Invoice Payments:


1. Predictable Payment Terms Schedule


In general, suppliers are paid by their clients on standard terms — 15 days - 30 days - 45 days - 60 days - 90 days. Problems usually arise when both the supplier and their clients have no idea of the terms of each invoice payment. More often than not, these terms are verbally agreed upon between both parties (This is more common than what you think!). It is therefore important that suppliers set these terms prior to engaging any business activity with their clients. Upon gaining some payment experience, you can adjust your payment terms on a quarterly or semi-annual basis that is agreeable to you and your clients. Because knowing when you’ll receive your cash is an important factor in analyzing and managing your cashflow.


You can read more about creating a cashflow analysis through link:


2. Agreeable Finance Officer


Are you tired of hearing excuses such as “Payment is still processing” (after your 10th call) , “We’ll get back to you”, or “We’re still looking into this”?


An unspoken rule but something that must be said - one way to comfortably ease your way to the good side of your client is by charming your way into your client’s finance department. As one major benefit, they can prioritize payments to your business, but building this relationship will not only give you chances of securing early or on time payment but the transparency suppliers ASK FOR regarding the status of their collection.


In Myanmar, there seems to be a sort of gap in the internal processes between the project managers and the finance officer. Usually, the finance officer would not have an idea of your project and are only following payment protocols, but are in charge of releasing payments. This is something that is not entirely out of your control. Before the start of your project make sure that BOTH the finance officer and the project manager are looped in all communications to ensure that your project is properly documented between these two departments.


3. Invoice Factoring / Invoice Discounting


If by chance, you and your clients have already agreed on payment terms and you need some funds for working capital, you can always choose to use your Invoice Receivable as a ‘collateral’ to get immediate funding. Invoice Factoring or Invoice Discounting is an alternative form of financing where Invoice Receivables are used as ‘collateral’ to get early payment or funding. For example, you have an invoice of 100,000 Ks which you expect to be paid after 60 days, through Invoice Factoring or Discounting, you can get cash upfront, let’s say 90,000 Ks upfront instead of waiting 60 days for 100,000 Ks.



Find out more about Invoice Discounting:


4. Negotiable Terms


Another way to establish a healthy relationship with your client is by offering them flexible payment terms. In all new relationships, both parties learn how to compromise. On the chance that your clients suddenly request for a payment extension always be ready on your side to settle. How will this help you with collections? When setting your payment terms schedule with your client always add a ‘grace period’ or a ‘collections period’ to help you adjust with sudden payment delays or extensions (as an internal procedure). Setting this grace period will also help you internally manage a realistic cashflow forecast and projections.


5.Late Payment Penalties


Late payments always lead to opportunity loss for your businesses. Some companies add a late penalty fee or percentage to their invoices to account for these possible opportunity loss. This would encourage your clients to pay on time or at least intimidate them not to pay late. There are a couple of things you need to keep in mind before imposing Late payment penalty fees:


  1. Make sure your Client is satisfied with your work,
  2. Your clients have to be aware of the penalty fee (make the late penalty fee visible in every invoice),
  3. Don’t always charge the late penalty fee (case to case basis), &
  4. Set your interest rate to be at par with the laws in your Country (Myanmar: 8% - 10% per annum)


6. 3rd Party Collections Agent


            To really keep your Invoice payment and collections worries at bay why not hire a third party collections agency to do the worrying for you? Third Party collection agency’s expertise are collecting delinquent payments and they usually hire their own legal team to intimidate people or businesses into paying their debts. Maybe not the best option if you want to maintain a decent relationship with your client but you can hire this third party collections agent for your difficult clients. One downside though is a lot of collections agency’s fees are a high - they usually get a percentage from the amount they can successfully collect from your client.


7. Supplier Early Payment Discount


            Similar to Late Payment Penalties, one way of also incentivizing early invoice payment is by giving client discounts for early invoice payment. You can set this discount in terms of Tiers: (example)


Tier 1 : 15 days earlier than due date - 2% Discount

Tier 2: 10 days earlier than due date - 1.5% Discount

Tier 3: 5 days earlier than due date - 1% Discount


Or if you don’t want this to affect your cashflow, you can give out freebies or discount for their next order.


8. Scheduled Collection Reminders


By setting up internal collection protocols or setting up your own collection team you can effectively make invoice payment collections easier for you. Though this may require additional manpower, having an officer monitor your collectibles will create an impact on time payments and client relationship management. But before creating your own team, you have to weigh first the cost and benefit of moving forward with an internal collections team or not.


Collection reminders can also be set by tone - (1) Soft Collection Reminders (10 to 5 days before Invoice Due Date), (2) Hard Collections Reminders (imposing penalties or everyday follow ups - After the Invoice Due Date


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Always remember: SMEs are more powerful than what you think.


Our philosophy is that we want to be an ecosystem. Our philosophy is to empower others to sell, empower others to service, making sure the other people are more powerful than us. With our technology, our innovation, our partners - 10 million small business sellers - they can compete with Microsoft and IBM.” - Jack Ma