Do you find it difficult to get customers to pay on time? Late paying customers have historically been the bane of small businesses, so it’s not surprising if you do. Yet the success of your business depends on customers or clients paying on time for the goods and services you offer. Late paying clients – or worse non-paying – present a cash flow issue and they take a lot of your time to manage.
While there’s no one way to get clients to pay on time; there are some things you can do to improve or prevent a late-payer situation: Here are five:
- Credit checks and references: Especially when you are dealing with a customer where a large amount of money is involved and the relationship is ongoing, run a credit check. The time and cost is worth avoiding a customer who may end up causing payment problems. At the same time, ask for references from previous or current business partners to find out if they had problems with late payments.
- Clearly-written contracts: It’s essential to put the terms of your agreement in writing regarding amount(s) of payment and due dates. By spelling everything out in a contract, you avoid any misunderstandings about what is to be paid and when.
- Incentives for prompt payment: Consider offering a discount for customers who pay on time. You could, for example, offer a small percentage discount – five or 10 percent – on payments that meet your small business Net15 or Net30 terms.
- Late payment penalties: If you feel it’s necessary to implement a late payment policy, make sure to include it your contract. Whatever terms you decide – even a small interest amount – make it very clear that if payment is not received by a certain due date, the interest amount will begin to accrue.
- Up-front payments: Depending on the kind of customers or client and the nature of your relationship, you could also ask for payment up front or a deposit to offset any late payments. Deposits or payments in advance are particularly useful in service businesses where your offering is the labor of your small business team.
Online invoicing may help the process
In “4 Ways to Get Your Clients to Pay Their Bills & Invoices on Time,” PaySimple.com blogger Patrick Jones suggests setting up recurring billing to ensure that clients and customers don’t forget to pay. Online recurring billing systems enable you to input the customer’s billing information, the amount of each billing transaction and the payment methods – credit card or bank account. Clients and customers automatically receive an email receipt for payment. If not all your customers make recurring payments, you also can use email invoicing. Your customer receives the email notice and can make payment automatically using a secure online form.
Be positive and polite
Whatever the reason for late payment, before calling in an outside service to help you secure the money owed, contact your customer. Late payment may simple be an oversight. Start out with an email or call as a reminder and always be professional and polite. Only resort to debt collection agencies as a last resort.
What works for you when a customer is late in paying?
Help us get out the vote for 2013 Small Business Influencer Award