This article is made in collaboration with Amy Collett, please visit her blog: http://bizwell.org/my-blog/
Businesses need to stay on top of accounts receivable as a form of managing cash flow and ensuring the financial health of their companies. Unfortunately, late or missed payments by customers can throw accounting into turmoil, potentially impacting your financial solvency. There are ways, however, to ensure on-time payments without damaging customer relationships. Here, London-based UI/UX designer Antonio Dell' Omo shares some helpful insights.
Establish Clear Payment Practices
If you perform services prior to charging a customer, promptly send an invoice that has specific details about when payment is due. Consider language that indicates your appreciation for the customer’s prompt payment as a way to ensure your business remains financially stable and well-positioned to provide high levels of customer service. For example, “Your prompt payment ensures we have the ability to continue operating at optimal levels in providing high-quality service to our customers and clients.”
Offer Multiple Ways To Pay
If someone has to write a check or go to the bank for a money order, address an envelope, and find a stamp and a mailbox in order to pay you, there may be a lag between the time services are rendered and payment is received. Make it easy for your customers to pay you by offering numerous options, including electronic payments via platforms like Skrilll or Payoneer, and of course, with multiple types of credit cards. According to Qualtrics, the more ways you give customers to pay, the more likely they are to be prompt.
Incentivize Early Payments
While many companies penalize consumers for late payments by charging a late fee, that can lead to animosity in the customer relationship. Instead, Pay 4 recommends finding ways to reward customers for paying early. This might include a slight discount or some other perk that is easy for you to provide. If you have a regular client with a recurring service in the same amount you may also offer a percentage discount if they set up automatic payments through their bank.
Work With Customers
Sometimes people go through a rough financial patch, which makes it difficult for them to meet their debt obligations in a timely fashion. If you find customers, particularly loyal, long-term clients, struggling to pay invoices, work on a solution that meets both of your needs and prevents you from having to take them to collections. For example, a few deferred payments or a repayment payment plan could work. This approach tells customers you value them, sympathize with their situation, and want to help.
If you have trouble handling customer service by yourself, or if you could stand to use some additional customer service representatives, make life easy and look into hiring additional workers through a staffing agency. Recruiters can take care of the details you don’t have time for, expediting the process of onboarding new employees.
Organize Your Invoicing
There are a number of different tools and processes that can help you with your overall accounting organization. For example, you can invest in software for invoicing that helps automate your processes. Look for a system with a platform that lets you run batch invoices, which helps you save time, money, and makes it easier to track both incoming and outstanding payments. Also, ask customers whether they prefer to be billed via paper or electronic invoice. The easier you make things, the faster you’re likely to get paid.
All companies, particularly small businesses, rely on prompt payments from customers and clients to ensure the financial viability of their operations. Recognize that most customers are not trying to cheat you by missing payments, but are often struggling with finances on their own, or have simply forgotten. Give people the benefit of the doubt early on and don't resort to collections until absolutely necessary.
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Photo by Roman Synkevych on Unsplash