One of the biggest challenges small to mid-sized businesses face is managing cash-flow, specifically, getting customers to pay their bills in a timely manner. When you’re constantly chasing after delinquent balances, not only is it a waste of valuable time and resources, but it ultimately affects your bottom line. The good news is there are several simple things you can do to improve the chances of your clientele remitting payment when it’s due. Here’s how.
Communicate Your Payment Policy – Every business should have a detailed payment policy, whether it requires payment on receipt, 30 day terms, or something else. Whatever your policy is, make sure it’s made clear to all of your customers prior to entering into a business arrangement. That way everyone is on the same page right from the start.
Stay on Top of Invoicing – If you want to receive timely payments, make sure you’re staying on top of your invoicing duties. If you find it’s becoming too difficult to stay on top of this, consider delegating the task to another team member or hiring an outside firm to handle your accounts payable duties.
Make it Easy – In today’s digital world, people are turning to the convenience of technology to handle just about all of their business activities – including payments for goods or services. Make it easy for your customers to pay by offering them plenty of options, such as payment by phone, or online – either directly through your website or via secure payment portals like PayPal.
Offer a Discount – Sometimes offering an incentive for timely payments can motivate otherwise slow-paying customers to remit balances on time or even early. For instance, try offering a small discount of 5% off the entire balance if payment is made before it is due.
Assess Late Fees – If the lure of a discount isn’t working, or you prefer not to offer one, the opposite can also work as a good motivator for timely payments. Enforce a late payment penalty through which a small amount of interest will be assessed for each day the payment is late. Just be sure to clearly communicate this rule in your payment policy and on all invoices so there’s no confusion or surprises when it comes time to enforce it.
Create Contracts – Entering into a contract before doing business with a customer can be helpful when it comes time to collect payment. The contract should include detailed information about when payment is expected as well as specific language on how late payments will be handled. Signed contracts are also much easier to enforce if you end up having to go to court over any unpaid balances.
Request Payment Upfront – Depending on your industry and the type of job being completed, asking for a portion of the payment upfront can ensure that you’ll at least have some of what’s owed to you. It can also make paying the final amount a little less burdensome for your customer, since only the remaining portion is due.
Getting customers to pay in a timely manner is important for managing the overall cash flow of your business. By implementing these simple suggestions, you’ll be more likely to keep payments coming in so you can focus on more important matters – like increasing sales and growing your business.