Understanding Debtors And Ideas To Get Paid…

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The debtor situation in a business usually makes people uncomfortable. It’s often a problem that’s given to somebody else to handle because it’s just too difficult.It doesn’t have to be that way. Instead of considering your debtor situation a bad problem, consider it in a new light—the light of opportunity! 

I’m going to delve into the meaning of debt, what it is, and how best to measure and control debtors.

You’ll then discover a host of strategies designed to reduce your current debt problem, all of which are based on one premise. A premise that will have the cash flowing to your business more freely.

This really is a pivotal topic simply because your cash flow and control of your debtors affects every other part of your business. It can affect your profits profoundly, too.

Imagine how easy it would be

Imagine if you could have every single cent your business was owed in your bank account tomorrow morning.


Consider this: Wouldn’t it be interesting to work out how long you could shut up shop if you did?

One business owner made this comment

“If we could get all the money we were owed, we could close down until the beginning of the next Financial Year.”(7 months later.)

Of course, that’s not to say you’d want to close up shop for the next 7 months after you collected all that belongs to you. Rather, the idea illustrates the potential magnitude of a bad debtor situation.

When you’re frustrated by the health of your business, always analyse your own debtor situation before you look at ways to acquire more work.You should be looking at ways to get the money in through the front door beforeconsidering ways to get more work out. 

Although seemingly simple, this concept can be extremely difficult for some to apply.

The purpose of this information is to show you how to apply this concept by building systems that will keep your accounts receivables low and yet not need your constant attention.

The ideas, tools, and systems outlined here will help you leverage your time so that you have the opportunity to work ON your business rather than IN your business.AND you collect what you are owed more easily.

What is debt, really?

Perhaps at this point you’re thinking to yourself:

“I know what debt is. I’ve been dealing with debt throughout my career!”Certainly that’s true. However, consider a different perspective on a common problem.

With that in mind, what is debt?

And not from a fancy economist point of view, but from yourpoint of view.

Really, debt is your money—in someone else’s pocket

It’s not right and it makes life tough and unpleasant.

You can turn that around, though, and you can have fun doing it.

The best way we know of to work out how badly you need to eliminate this problem is through the numbers. Numbers in this case speak louder than words, and a good mathematical equation can truly paint the picture about your business.

Key performance indicators for debts

Critical questions for your business.

What is the average size in days of your accounts receivables?

Answer here if you know the figure: _______

What do you collect before you start work compared to after the work has been completed?

What is the ratio of your bad debts to accounts paid?

Answer here if you know the figure: _______ . Otherwise be sure to calculate this as soon as you can.

These aspects of your accounts receivables can be your telltale signs. Consider them the specific Key Performance Indicators of your debtor situation.

Now do the numbers for yourself. If you could reduce the time you have to wait for an account to come in by 10 days, say from 30 to 20 days, how would this affect your cash flow?

What would happen if you collected 10% more of your fees before you started the work? Or instead of having a ratio of 20% collected before completion, let’s say you could change that to 30%. What would this mean to your bottom line?

These improvements are possible. What effect do you think they would have on your bad debt ratio?

Now that it’s clear you can improve your existing debtor situation, let’s look at probably the most significant way to get the dollars you’re owed in your pocket.

Make it fun

Debt collecting doesn’t have to be a visit from the boys with bulging muscles, and more importantly, it doesn’t have to be perceived that way, either. You should make it a standard in your office to make debt collecting…


A fun way to collect a debt reduces the possibility of upsetting clients. Remember, disgruntled clients will never come back, so don’t aggravate them—inspire them.

Some examples for you

Around the bank manager in 80 days, the idea originated at a courier company.

It’s called a Prompt Payers Club. The club is for customers who simply pay their bills on time.

What’s in it for them? Every month the customers who are in this Prompt Payers Club are entered into a draw. The winner gets their name published in the business newsletter.

You could easily do the same. You aren’t limited to just publishing the winner’s name, though.You might also promote the client by featuring a profile article in your newsletter.

In this example, the monthly winner in the Prompt Payers Club also receives a free balloon flight over the city.

What does the balloon flight cost each month? Well, it might cost about $500, but it does secure a lot of payments that would have become debt problems.

Work out how much time you spend chasing debt and put a value to it.Certainly, it’s more than $500.

An interesting way to find a low-cost but valuable prize would be to look into your client base and see if any clients would like to promote their services or goods to your other clients.

For example, if a gym owner is a customer, why not arrange to give away a year’s free membership to that gym? Perhaps you know other exciting businesses with whom you could arrange a relationship?

If you collected your thoughts and approached some noncompeting businesspeople, you could probably organise a monthly prize that would be valued at thousands of dollars in your customers’ eyes.

If you consider all this a bit much, you could arrange for the monthly winner to be refunded the cost of their work.

Of course, these are considerable suggestions, so you really need to work out how serious your debt problem isand then DO SOMETHING FUN.

Change the wording, change the debt

A less dramatic strategy would be to modify the wording of your invoices from “payable within seven days” to a more specific call to action. Try wording your invoices with a due date for payment. For example:

‘Your payment would be appreciated by September 14.’

The owner of a secretarial services business had a dilemma, probably not dissimilar to something you may have experienced. You see, her business was growing and thriving. But she was experiencing the all-too-common cash flow problem—having to carry accounts. She had to pay her staff and overheads during the month, but her clients were taking 30 days or more to pay.

To speed up the cash flow from her customers, she originally added this line to her invoices: ‘This invoice is now due and payable within 7 days of date of invoice.’ Nothing happened. Clients clearly judged that ‘within 7 days’ really meant 30!

She decided it was time to do something about it. Using some of the ideas you’ll find here.

Step 1: she replaced the ‘payable within 7 days’ wording to one that noted a specific date for payment. Her invoice then read as mentioned above: ‘This amount is due by September 14th.’

The effect of just that alone has been astonishing. People now pay within days of that specified date.

If customers are still reluctant, she moves to Step 2:

A simple ‘with compliments slip’ reminder. This slip is hand-written and mailed in a stamped, hand-written envelope. More success!

In fact, she recounted that after mailing this friendly reminder, the accountant of one client company walked in personally to pay the bill!

And then Step 3. For those who are still slow to pay, she sends a firm ‘reasoning’ letter. Fact is, Step 1 and Step 2 work so well that she rarely has to send this letter!

Why not stick it to them?

This is another simple idea that makes a profound difference. Try using stickers with cute dialogues that convey a far more important message. You’ll find a couple of examples of these stickers at the end of this blog.

One business owner used just 2 different sorts of these stickers. One said, ‘Thank you, we really do appreciate the way you always pay your accounts on time.’ The second said, ‘Thank you for being such a good customer. We wish we had more like you.’

The results?

His account payments jumped a full 24%! Well worth the couple of bucks it cost to buy the stickers!

You can find a supplier of these sorts of reminder stickers in your area. Buy some and start using them. Again, they’re different, and they attract attention.

Buy back your hard-to-get debts from your clients

This idea originates from a professional firm. Shane had some success with his slow payers. If they owe, for example, $5,000 for an extended period, he sends them one of his own real checks made out to himself for $500.

Shane then invites his debtor to use it as part payment for the amount outstanding.It works, and you must agree, better a 10% gift than a 100% write-off!

Reward your clients for doing what they’re supposed to do!

This idea comes from Barry, owner of a specialty printing business. The business specialises in printing embossed, gold-foil certificate blanks.

Barry used one of his blanks to print up a high-quality Certificate of Appreciation, which was awarded…

Another suggestion would be to simply send a ‘with compliments’ slip to say ‘thanks for paying your account on time.’ Remember, the little things are what make profound differences in your business.

This may not directly help to collect the money that is out there. But it may help you stop any more money from going out and becoming an addition to your debt problem.

Just to give you an idea of how you can go about putting these ‘with compliments’ slips together, here are 3 examples:


Thank you—for fixing your account today.

It makes it so much easier for us to continue giving you the excellent service you deserve.’



We need more clients like you!

You see, when you paid your account promptly, it helped us enormously.

By keeping our wheels turning freely, it allows us to give you the level of service you so richly deserve.

Thank you! Thank you! Thank you!’


‘Just wanted to say…

Thank you so much for fixing up the first part of your account.

It certainly helps us to keep everything on track. And it also helps us to continue to give you the kind of service you deserve.

Thanks again.’

It’s best to hand-write the letters. To make this an easier process for you, ask your printer if they can do it for you from your original hand-written message.

So you can see there are a multitude of new, exciting, different, workable ideas to apply to debtors! Ideas that have already been proven to bring results.

Our way of doing things is unique and it’s why it produces unique results for our clients…

We would love the opportunity to help you clear your head on what is the right way for you to accelerate your business… 

We highly recommend you watch this step-by-step case study of how we grew Beefy’s Pies into a Famous Aussie Icon from a small stressed out bakery into a family owned chain. Click here to get all the insights into their success…

Or if you have heard enough about how we work with our small business owners, then let’s have an off the record chat about your current situation and see what we can do to immediately guide you…click this link to see what time best suits you.

Wayne Hutcheson

P.S. Ask if our Boardroom Program intake is open for enrolments…It works best for business owners who see the benefit of having us on as their ‘external partner’ so that they are not alone in the day to day decisions of their business. 








About the Author:

Wayne Hutcheson is a Coach of the highly regarded Grow Business Grow Boardroom Program. He works closely with a hand full of clients to help them achieve growth in their business and to enjoy 'guilt-free' time away from their business without it affecting their profitability.
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