Timely payments are very crucial for a business. You will be able to have a smooth operation if your cash flow is regular and consistent. This cash flow is important especially for small business owners as they don’t have heavy capital like big co-operations.
Unfortunately, business is not as ideal as we wish it to be.
The secrets to getting your debtors to cough up the cash may seem extreme in some cases, but your cash flow is vital to your business operation.
Let’s go through these 10 secrets that will help your business and prevent you from getting more headaches.
1. Consider Taking A Strong Action
It’s always better to analyse the whole situation and then act on it. Make sure you know what’s going on with the client before deciding to take action to recover the funds.
Threatening legal action against a good customer who has slipped up on paying one bill could jeopardise future relations, and you may lose that customer to your competitor. At the end of the day, you do need to try and collect the money for the good of your own company.
The big question is how long you wait and how you proceed with the process. Any collection process is going to cause adversity, and the situation will become strained.
So, evaluate the situation and consider taking the right action.
2. Show Professionalism Right From The Begining
In business, if you want your clients to take you seriously, you need to portray a professional attitude and operational ability. Ensuring that your website is informative and consists of testimonials from previous customers is the battle half won. Just because you own the business does not mean that you can treat your customers any less civilly.
Respect your clients and behave professionally when dealing with them. It is imperative to communicate with your customers regularly even if only to greet them. This personalized attention will make all the difference when the time comes to make the payment.
3. Know Your Customer Well
It is a good idea to know who you are going to be dealing with before attending any meeting or negotiation. There are varying degrees of problem customers that you should be aware of. Take this into account when doing your research and before you confirm a meeting. If you have already confirmed, it is not too late to cancel.
- Chaotic – A chaotic customer is one who frequently runs late or cancels meetings on a whim.
- Clueless – A clueless customer is a customer who is not clear in identifying the scope of work. They do not seem to know what it is they are looking for.
- Jerks – As in life, these people are not hard to identify. Run for the hills.
- The Cheapskate – The cheapskate customer is the one who constantly tries to persuade you to provide them with a lower rate.
- The Big Bore – A boring customer does not strike your interest at all. You are not excited by what they have to offer.
4. Give Incentives For Early Payments
To prevent late payments, you could offer your customers incentives for early payments or payments made by the due date. Any saving is a good deal and may just be the gentle persuasion they need to fulfil their commitment to you.
A discount that you can comfortably manage is the best option in this case. You can also make the payment process simple by giving different payment options like Debit cards, credit cards, UPI etc.
5. Enforce Late Penalties
There will always be a customer who is not swayed by your positive rewards of incentives to pay early. This customer is the one that usually responds to the negative reinforcement that accompanies late payment fees.
Consider each situation carefully before imposing this fee.
Late payment charges let your customer know that you are a professional business and that their payment behaviour is not acceptable now and will not be in the future
6. Embrace Automated Invoicing Systems
The old method of printing paper invoices and posting them out leaves too much room for excuses. Customers can place the blame on the postal service for the non-receipt of invoices. New online systems generate invoices and send them to the customer who then has the opportunity to pay it online at that time.
A good invoicing software will continue to remind your customer until the payment is made. And this way, you will have the time to seek out more work.
7. Be Flexible with Your Payment Methods
Provide a variety of payment methods to your customers. The more options you provide, the easier you make it for the customer to fulfil the commitment and the more likely you are to get paid faster.
You can try cash free invoicing, it’s easy and fast. Bank transfers, bank deposits, credit or debit card payments, cash or check payments are the most commonly used and should be made available.
8. Establish Terms Of Contract
f you are negotiating a new deal or renewing an old one, it is best to come to an agreement about the payment terms and get it in writing. In this way, you eliminate any misunderstanding regarding your payment expectations from the said job or project. make sure you send them a proper invoice and send it before you start working.
Learn how to write invoice payment terms
9. Ask For Upfront or Advance Payments
Request an upfront payment from all your customers, this gives you assurance and your clients take your work seriously. If you struggle with being upfront about payments there are article which can help you with it.
Read more about advance payments.
10. Say No To Free Work
If a customer hasn’t paid you, stop working! You can resume work once the customer has made the outstanding payment. Your customer will soon realize that their late payment behaviour is also affecting their work and that you will not tolerate such action.
You are a professional and they should treat you like one. Use the time to work on a project that you know will pay you on time.
If none of the above work in achieving the results you require, and you still have customers that pay late, these are the steps that you can take to get paid faster.
Send A Gentle Reminder
If a debtor has not paid up, it is best to give him/her a gentle reminder that there is a bill that hasn’t been settled. You can do it via email or telephonic call; the choice is yours!
Your debtor will have the opportunity to defend his actions, and you will probably find that payment will follow shortly after that.
The gentle reminder did not result in a payment. It is time to lay down the law sternly. Hostility is not going to help in this situation but be firm. Explain and demand the payment immediately or if that isn’t possible, you need a firm commitment of when it will be paid. Of course, this isn’t going to work in cases where the debtor is a difficult one, or they don’t have any money.
Consider Legal Action
Legal action is the only option left if your problem still exists. The problem in business today is that many companies simply don’t have the funds to make payments to all their creditors. You need to find a way to the top of the priority list. Repeated emails, phone calls, and personal visits will be the way to ensure that you are paid before any other creditor.
Persistence will achieve success. If the debtor has any money, you will be first paid if only to get you to stop calling.
As a creditor, you must bear in mind that some laws govern the collection of money and the process followed. If you violate the laws, you will find yourself on the wrong end of the law and possibly, in violation of civil rights.
Legal action is the last step in any collection process and is one that normally does not end in a good relationship with the client. Be ready to lose the customer.
Collecting money owed to you can be a tedious job, and it is not in the least bit enjoyable. You need to understand that the way you approach the situation will affect the results. Being assertive does not equate to threatening the debtor.
Civility does not mean that your collection efforts will be ineffective. You should not feel that taking these steps is the wrong thing to do. Writing off bad debts will affect the bottom line of your own company. The economy is such these days that no company can afford the obstacles created by outstanding money.
It is understandable that you want to collect all the outstanding monies, even if they are late but it is also important to realize when to draw the line and cut your losses. Chasing after a customer you know you have little chance of getting any money from will end up costing you in legal costs and time both.
You don’t want to end up using funds that you have received to try and collect funds you are never going to. Yes, the customer is liable for the legal costs, but if they aren’t going to pay anyway, it makes no sense to chase after them and extinguish all your resources in the process.
One other way to ensure Timely payments is to invest in accounting software like profitbooks. Profitbooks help you create beautiful invoices, inventory management etc. You can also integrate different payment gateways insuring faster payments.
You can also use the software for free, visit our website and register your business today.Try ProfitBooks Free Today