There are not many factors that control the cash flow of a business more than customers and the time frame in which they pay for products or services. In short, customers pay late, cash flow suffers. Customers pay on time, resulting in positive cashflow. When it comes to accounts receivables, it’s that simple.
However, we are not living in an ideal world and for many in business, chasing down payments is just part of running a business. If your organization extends credit in any way, you’ll be investing some measure of resources in trying to get paid on time. From forgetful customers, disputes to a charge to the more trying cases such as customer just not paying, you’ll need to deal with all types of situations when it comes to getting customers caught up with you.
When we speak with professionals whether in person, by the phone or even at trade shows, we are always asked about some of the tactics they should employ to get their customers to pay on time. Here are some of our expert tips.
How to get clients to pay faster
When at all possible, make sure you have written agreements with your customers and clients. Depending on your work or industry can dictate the complexity of your agreement. But in many cases, even a simple one-page letter of terms will suffice when it comes to accountability and legal back up if you need to move into collection activity. Make sure what you are offering in detail is in your letter as well as any and all payment terms.
We have said this over and over again. You have to invoice on time and at regular intervals. We understand that for many, there doesn’t seem to be enough hours in the day sometimes. Especially if you are running a trade business. In fact, we have seen many in home improvement, swimming pool construction and other business see a huge increase in business during COVID-19. That has caused many to work endless hours for the client and not enough on paperwork and accounting. However, if you want to stay cash flow positive, you have to make time to invoice on time, or hire someone to do it.
Due By, Not Due on Receipt
We see one mistake over and over again. Companies not listing a “Due By” date on their invoices. We see the common phrase, due on receipt. Posting a due date on your invoice creates urgency for someone to pay their bill on time. It tells that customer that you expect a payment on that specific date. Not when they get around to it. You see this in all your major utilities and larger companies. They understand their bill needs that firm date for payment.
Implement Late Fees
You want your invoice to get to the top of the pile and one way to do that is to implement late fees. However, if you are going to go that route, make sure those fees are in your written agreement. There can be no surprises. Having late fees can create urgency and gives the customer the impression that they may save money by paying on time. You can always reverse those late fees if you find yourself in a unique situation with a customer.
If you want your business to get customers to pay on time, be nice. It’s that simple. Yes, you are going to have customers that take advantage of your business and how nice you are but the majority of customers want to pay you on time and appreciate you and your staff for being cordial in good times and in times of struggle. It’s not about customer service anymore. It is all about customer experience. And the way they are treated when they do not pay on time is also part of their customer experience. Even when you run up against a customer dispute, you have to show respect and a true willingness to help. That’s one of the best ways to achieve a lifelong customer.
Watch for Red Flags on Customers
A customer that pays their bill late more than once is going to most likely continue that pattern. For whatever reason, that customer has decided that paying bills on time is not a priority. Or they are disorganized. You cannot do anything about the latter, unless you are a professional organizer, but you can stay on top of customers that time after time, pay late. They may need constant reminders.
Depending on your type of business, you are going to have some percentage of customers that need a little more prompting to pay than others. You cannot get angry and you cannot get discouraged. Late and non-paying customers are part of running any size business.
That’s why it is important to get help in the form of a third-party professional debt collection agency that not only knows your industry but understands the importance of treating everyone with respect.
Many companies might hesitate to hire a collection agency because they feel it will only harm their business, but it is quite the opposite. Yes, you are going to have customers that get angry because you sent their account to collections but most will actually have a good feeling after they figure out a way to get current on their obligations to your company.
Angry customers do NOT say these types of things to debt collectors.
“Thank you guys so much. You guys did a world full of wonders helping me, and I appreciate that.”
“Thank you so much about being so nice about this whole debt”
“Thank you so much for your assistance, and thank you for calling me , I wasn’t aware of this. I really appreciate all your help.”
Hiring the right agency will only help your company. The right agency will help you get paid on time, help retain customers and preserve future revenue. And, preserve your reputation.