As an entrepreneur, you are well aware with the crucial role of cash flow to your business. On that very same note, several things in this business world are really as frustrating as a client who doesn’t pay promptly. Try out as you may, at times certainly you will come across some people who are really slow in paying or trying to skip out altogether occasionally. There is good news that few things are out there that you can perform to make your clients pay you faster.
- Set the perfect stage early
Get your company’s payment policy out and ready in the open at the very beginning. During each sales process, even before the signing of the contract, explain and document (within the contract itself) your company’s terms and expectations regarding the payment from the client. If there is any term that needs to be negotiated, always do it during or before the sale, not after.
- Don’t forget to set up an internal payment process
Be sure to notice that a formal process of payment is followed each & every time and also for every client. For example, you are offering net 30 terms and have not received your payment on the 31st day, be sure to send an e-mail to say that your payment has not arrived yet and feel free to ask the status. After a period of 35 days, make a call. After 45 days, be sure to send a letter (through snail mail) and send a certified letter that explains the dues and penalties for late payment after 60 days. Once payment has been delayed by 75 days delinquent, start notifying a collection agency and try to get them involved. Having this perfect policy in place will certainly help ensure your company knows what and when to do it.
- Include your self-addressed stamped envelope
Why this technique works is just beyond me, but it surely does! While sending your invoices, include a self-addressed stamped envelope for sending the payment back to you. In my opinion as well as experience, these payments come back faster.
- Take credit cards
Skip being a banker, that’s what you are being when you are allowing a client for taking their time to pay you. Instead, just let the credit or debit Card Company be your banker. It can be done by offering credit or debit card payments. Always keep it in mind that there may be a 2% to 3% credit card fee in certain cases. However, it far better to have 97% of the total amount right now than having the whole 100% of it a year later.
5. Disarm the excuses
Getting some excuses for a late payment is common. The two most common excuses are “I never received your invoice (or little variation of this) or I totally disagree with your bill. So, don’t forget to nip it in the bud just by calling your clients five days after sending out the invoice to inquire that they have received your invoice. Ask your client clearly if he has any queries or concerns regarding your invoice and always make sure that they are aware about the policy that the payment is due in next 30 days.
You might still have a few late-paying clients after the incorporation of above steps into your payment process. But I can certainly assure you that it will speed up the time period for getting paid from majority of your clients. Asking for upfront may seem to be simpler but it may lose your clients if you do not operate on credit in time.