Asking for money is never easy but the reality is that you’re entitled to be paid for the work you've done. So, let’s talk about the things you can do before your invoices are due to give you the best chance of being paid on time.
Let’s talk about preventative measures you can take to avoid late payments
Know your customer
Run credit checks on new customers before offering credit terms and set appropriate credit limits. A simple credit check online could save valuable time and money. Make credit checks an ongoing process as even the most reliable payers can have a change in circumstances.
Get a purchase order
If your customers use purchase orders, make sure they send you one for every order. Having a purchase order puts your mind at ease – in case there are any disputes when the products are delivered, you can refer to what was agreed in the purchase order.
Explicit payment terms
Make your payment terms clear and consistent from the start and advise customers about any late payment charges to avoid disputes. The standard term of 30 days gives a basis on which to collect payment and take further action if necessary. Consider including payment terms on statements, invoices and in the Terms and Conditions of business.
There’s no point in hoping you’ll get paid on time if your invoices are not sent promptly and correctly. Send invoices soon after the job has been completed and stick to a regular payment schedule. The invoice should clearly state the nature of the work, the due date for payment and payment terms.
The first step toward keeping on top of overdue payments is to maintain up-to-date records to identify any potential issues at an early stage, and where necessary take steps to resolve them. Track invoices and accounts receivable weekly to determine which clients have and have not paid.
Provide flexible payment options
Remove obstacles and make it as easy as possible for clients to pay you. Giving various payment options gives your customers more reasons to pay you easily and on time.
Make customer service a priority
Providing a great experience isn’t just the right thing to do, it makes financial sense for your business as you’re more likely to be paid for the work you’ve done if your customer is happy.
Offer early payment discounts
Incentives can motivate your clients to pay early, even if it’s just a small discount of 2% if paid within ten days. Not only is it a great way to encourage speedy payment and maintain cash flow but it could also lead to a more long-term relationship.
While you can never guarantee that every customer will pay every bill on time, reducing the time and money spent on recovering late payments is something that all businesses, regardless of size and industry, can achieve with a little pre-planning. However, if late payments is still causing you cash flow issues then consider invoice factoring.