Every company relies on prompt payment from their customers to ensure a reliable cash flow. So what methods can you use to ensure you get paid on time for your products or services?
1. Charge Upfront
While this isn’t always possible, you should always attempt to arrange payment up front for your goods or services. One way would be to offer incentives such as a reduced rate for quick payment.
2. Give Customers a Choice
To get paid quicker offer your customers access to a number of payment channels such as credit card, online payment, direct debit, cash, check or ACH.
3. Call Ahead
Have your accounts team call the customer 7 days ahead of an invoice being issued as a gentle reminder that it’s coming and also give them contact details so they can call you to discuss any problems. If you don’t get a response on the seventh day, call again on the fifth and even third day before until you get an answer.
4. Be Quick to Respond
If a client does fall behind with payments, pick up the phone and call them, there might be a valid reason for not making the payment. A conversation means a resolution is reached amicably, with new payment terms established and agreed in writing.
5. Schedule Invoices
If you send out your invoices on a monthly basis, ensure they go out on the same day each month, so your customers expect an invoice from you on that day and will hopefully be in a position to pay it on time. If you sell products, send out the invoice with the product and follow up with an end of month statement.
6. Have a Spring Clean
Review the payment terms and credit limits set for your customers - are they still appropriate? Check their payment history: Do they pay on time every time, have the occasional slip or is it a regular theme chasing for payment?
7. Limit Invoice Disputes
To ensure you get paid for your product or services, set a realistic period of time (e.g. 7 days) that customers can dispute an invoice. This must be done in writing (either email or letter).
8. Don’t be Afraid to Ask
When setting up a new customer account, don’t be afraid to ask them awkward questions if it means you get all the information you need at the start of the business relationship. It will be harder to get it at a later date.
9. Collection Time
Unfortunately, you can’t always avoid customer accounts from becoming bad debt. So give the customer a 3 month improvement period as their circumstances might improve and you can renegotiate payment terms. However, this is not always the case and a collection agency may need to be employed.
10. Know Your Customer
The most reliable method is to check out your customers before extending them credit in the first place. As positive and negative business changes can happen at any time, use business credit reports to ensure your client is creditworthy and you can adjust your credit limit and payment terms accordingly.
If you would like to view a free business report, complete the form on the right for more information.