Getting paid by your customers is critical to maintaining the cash flow and overall financial health of your business. While it may not seem like a big deal to have one or two overdue bills, failing to address late payments can lead to devastating consequences for your operations.
Fortunately, there are tactful ways to get the money you’re owed, as well as prevent late payments in the future. Consider these tips from Portfolio Management Group.
Understand the urgency.
First of all, it’s essential that you and your team know exactly why it’s so important to get paid on time. As previously mentioned, it really comes down to cash flow. Knowing how much cash you have coming to your business at any given time allows you to make smart decisions that will keep your company healthy and growing, which is one of the things you need to focus on as a leader. For instance, having a big picture of your cash flow can help you determine if you should cut costs in a particular area or make specific purchases.
Work with professionals.
As a business owner, you have more than enough on your plate as it is. Keeping up with invoices and accounts receivable can become overwhelming when you’re wearing so many other hats. That’s why hiring a professional can prove invaluable. By outsourcing to an advanced billing service, you can ensure that your revenue cycle management is taken care of efficiently and accurately while you focus on running your business.
Reach out to the source.
If you’re dealing with late payments, one of the first things to do is contact the source directly. This can be awkward, especially if you are new to it. But you can speak with the customer without being rude, and doing so can help you secure payment and potentially increase the customer’s loyalty to your business. If your customer is another business, figure out the person who runs their accounting department to discuss solutions.
Send invoices more frequently.
A lot of the time, customers fail to pay a bill on time simply because it gets lost in the shuffle. One way to avoid that is to invoice your customers more frequently. For example, if you have a customer who is chronically late on payments, consider sending them an invoice twice a month, if not weekly. Seeing regular reminders of the invoice will make the customer more likely to pay.
Send invoices promptly.
Sometimes, late payments are partially the fault of the business. We’ve discussed how many hats you have to wear as a business owner, and it’s easy to let certain responsibilities fall through the cracks. But any time you sell a product or finish a project, be sure to send an invoice immediately afterward (if not in advance).
A customer is much more likely to pay promptly if they see an invoice with their recent purchase fresh on their mind. And if you’re dealing with another business, the invoice can instantly be entered into that company’s accounting and payment cycle.
Incentivize customers to pay early.
Finally, think of how you can avoid late payments altogether. The most practical way to accomplish this is to create incentives for your customers. For example, offer discounted rates or products to the customers who pay in advance. If your customers have the option to pay through your website, consider adding a banner that explains available incentives for early payments. You don’t even have to hire out for this sort of thing. With a free online banner maker, you can quickly create a professional quality website banner in minutes. Plus, these helpful online tools typically offer extras to enhance your creation through typography, visual design or even graphics.
You can also incentivize your customers to pay on time by administering late fees. Many companies add about 5% of the total bill if it isn’t paid by the due date. Of course, you would need to include the late fee in your contract terms and send reminders to your customers as the due date approaches.
There’s simply no way to maintain a healthy, profitable business when you’re dealing with consistently late payments. Fortunately, you can resolve this issue without damaging the relationships you have with your customers. In fact, if you do it the right way, you can strengthen those relationships. Consider the tips above and keep researching other strategies for securing the payments your company needs to thrive.
Do you need help with growing your business? Let the experts at Portfolio Management Group help. Through a collaborative effort, we can help you make the necessary changes to scale and level up your venture. Reach out today here to get started!