Three ways to turn bad debts into good cash

- Monday, January 25, 2016

Bad DebtWe’ve worked with plenty of small businesses that have been hit by the problem of bad debt. So we know how ageing debts can really hold back the growth of a business, not to mention the effectiveness of their long-term plans for the company.

But the problem of aged debts isn’t just the negative impact on your cash-flow situation. As business advisers, we’ve also seen first-hand how much time business owners can spend chasing up late-paying customers and resolving their payment issues – time that could have been spent more productively on building customer relationships or bringing new clients into the business.
So how do you turn your bad debt around and start making your cash pipeline look a whole lot more healthy? It’s not as difficult as you might think, and taking a few simple steps can have a significant effect on your numbers.
To help you on your way, we’ve highlighted three key ways to turn those bad debts into good cash.

1. Chaser: use tech to chase those outstanding invoices

Finding the time to chase late payments can be a challenge. You’ve got to run debtor reports, scan through them and contact the customers that have outstanding invoices to request payment. And this can eat into your admin time when your debtors begin to mount up over time.
But there is a way around this. And that’s to use technology to automate the debtor tracking and credit control process for you.
Chaser is an Add-on for Xero online accounting that chases your debts for you, so you don’t have to – saving you the time, hassle and stress of chasing payments.
•Automatically send emails to your customers as soon as an invoice is due.
•Tailor your emails to make them personalised and human.
•Track your emails so you know once a customer has read your message.
•Cut down on your financial admin time and streamline your credit control.
•Boost your cash flow by getting you paid faster!

2. Market Invoice: get cash fast with invoice factoring

Factoring is a fast way to raise the cash you need to fund those growth plans. And Market Invoice is the first choice for turning your outstanding invoices into cash.
You sell your unpaid invoices to Market Invoice for a fee. They buy the invoice, you get the cash fast, and the payment from the customer goes straight to Market Invoice. It’s really that straightforward and simple.
When you need to reduce your debts fast and give your cash pipeline a boost, debt factoring is a great way to create good cash for the business.
Market Invoice has a number of benefits:
•You can sell as many or few invoices as you want.
•You receive up to 90% of your invoice value upfront.
•The money is in your account within 24 hours of applying.
•You can fund invoices from £5k - £3m.
•There are no lengthy contracts, it’s flexible and doesn’t require personal guarantees.
•There’s a free online platform, making it fast and simple to apply online.

3. Get rid of client that don’t pay

Whatever industry you’re in, you’ll have come across the issue of late-paying customers – and those late payments have a terribly negative impact on cash flow.
Sometimes a missed invoice payment is an oversight, or a one-off problem caused by your customer experiencing poor cash flow. But there are those clients who regularly miss their payment date – and seem less than focused on changing this tardy behaviour any time soon.
Our advice for this kind of customer is very simple: get rid of them, and fast!
Having to constantly chase a customer to pay their invoices just isn’t a productive use of your time. So, stop wasting your precious time on late payers and start focusing on more productive areas of the business instead.
•Review your debtors and highlight the ten customers who always fail to pay.
•Pull off a statement showing all the outstanding invoices for each customer.
•Email this statement to the client and explain, politely, that payment is due.
•Make it clear that you won’t be providing any future work/products/services until their debt is cleared.
•For the worst offenders, end the relationship completely and explain your reasoning for doing so.

Getting cash from your business

So, there you have it: three simple ways to turn your bad debt into good cash.
We understand the impact that bad debt can have for small businesses. And with this in mind, we’re running an event to give you even more helpful tips on dealing with your cash-flow issues.
You can find out more about creating good cash at our

'Getting cash from your business' event on Wednesday 27 January. Chaser CEO, David Tuck, will be on hand to answer all your debt and cash-flow questions and we’ll be explaining how Xero is the perfect financial foundation for keeping on top of your cash pipeline.