The Best and Most Effective Ways to Deal with Late Payments
Any business owner would be quick to agree that one of the most common causes of cash flow problems for any business is late payments. If your customers only knew how their late payments affect your business operations, they wouldn’t even consider being late on their payments – even for a day! But, unfortunately, most customers don’t really have any idea of the consequences of their late payments – so, as a business owner, it’s really up to you to handle and deal with late payments so you will no longer have to face cash flow issues – at least from your end.
- Learn as much as you can about your client
One of the first things you can do before you even begin doing business with a client is to get to know them. Learn as much as you can about any new customer, including the exact legal name of their business as well as their legal status. If you can, do a background credit check on your customers so you will have a better idea of where they stand financially. Aside from a credit check, you should also ask your customers for references from suppliers they have done business with in the past so you can better gauge a client’s payment capacity and ability.
- Be clear with your terms of payment
Another way to handle late payments – or avoid them altogether – is to be extra clear with your terms of payment. Once you have agreed to do business with a customer, make it a point to clearly define your payment terms and policies. Make no assumptions – don’t just think that your customer will settle their account after the standard thirty days or at the end of the month – have everything in writing so your customers cannot raise any disputes. If possible, have your customer sign their understanding of your payment terms so everything is clear from the start.
- Promote on-time – and even early – payments
It is already a given that you should send out your invoices in advance so your customers have a chance to look through them and send you their payment on time. But there are other ways for you to promote on-time or even early payment – first, by making sure that your invoices are clear, easy to read, and easy to understand. Your invoices should include all the relevant details, such as the products or services that have been bought or provided, and each invoice should have an order number as well. Next, be clear with your penalties regarding late payments. If you have decided to charge interest for late payments, then state this clearly on your invoice as well.
On the other hand, you can also promote early or on-time payments by giving discounts, especially if customers settle their accounts early.
- Remind your customers in advance
When you have sent an invoice to a customer, make sure to monitor it. This is especially true if you are expecting a large payment. Give your customer a ring a week before the payment date, just to be sure that they have received the invoice and have no questions. And, if the due date has arrived but the payment hasn’t, telephone your customer immediately and let them know the consequences if they pay late.
At the end of the day, it’s how you manage your invoices – and avoid late payments – that makes a difference. And if you need some financial support in case your cash on-hand is running low, you can always rely on financing experts to help you acquire the finances you need.
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