One of the most commonly asked topics we get from Members is how do I keep on top of our cashflow?
The last resort is to issue a Letter of Demand which is the final step before engaging a debt collection agency or commencing legal proceedings through VCAT. To avoid having to use a Letter of Demand here are some top tips on keeping on top of your cashflow from the outset.
Set very clear payment guidelines for clients upfront, both verbally and contractually.
Ensure that your client knows your payment terms and conditions before you commence the project. The best way is to step them through the process with the contract in front of you and get their nod as you explain the process.
The BDAV Engagement agreement covers the following regarding payment of fees: – Basis of payment fees – lump sum; hourly rate; percentage of construction cost or a combination of the three – fees due at each stage of the project – invoicing and receiving payments in installments is a great way to ensure cashflow
– period of submission of accounts
– period for payment of accounts
– interest rate on overdue accounts
– accounting fee on overdue accounts
Being upfront, open and transparent is key to avoiding payment issues down the track.
Being transparent about all service costs extends to variations on a project. Avoid sending clients invoices they are not expecting. Speak to them before sending that ‘surprise’ invoice.
Rather than insisting on full payment upfront, spread payments over a reasonable time span. This will help to ensure regular cash flow and clients are less likely to default on payment mid-project if terms are more manageable and clearly defined.
Hire an experienced accountant who can pick up the phone on your behalf, talk openly with a client in a polite, professional manner, and get the bill paid.
Your accountant should be watching cash flow figures closely and ensure debts don’t build up.
Avoid debts occurring in the first place by following up early. Adhere to your own terms and conditions set in your contract and send invoices out in a timely manner. As soon as a payment becomes overdue, make sure you commence follow up procedures. This could include:
BDAV have added a Letter of Demand template to the Practice Notes section of the Member only section of the website.
Members are welcome to use this template or alternatively BDAV’s preferred lawyers Sinclair + May can tailor a specific response at a discounted member rate.
Contact details Sinclair & May
Ph: 03 9111 5660