If money is the lifeblood of your business, late payments are a destructive tourniquet that restricts cash flow, and prevents you from accomplishing your current goals and expanding your reach.
Your job as a company owner is to find ways to inspire your customers to resolve their invoices in full, and on time. Implement the following tips to help achieve this important goal.
1. Offer incentives
Sometimes, it just takes a small discount from the total price owed to convince a customer to resolve an invoice. Without fuss or fanfare, you can, for instance, offer a 5% discount to anyone who pays early and in full.
This gives you access to the funds, often when your project is still in progress. As a result, you can make necessary purchases and pay staff without overextending your own finances.
2. Offer recurring billing
In this popular payment arrangement that is often seen with prescriptions and club memberships, you and your customer agree on the terms.
Frequently, they will involve coming up with a total price for the entire job and then dividing it by the number of months necessary to complete it. Alternatively, you can also add the other costs involved into the total, including what you need to pay for supplies, employee salaries, taxes, etc.
The key is to set up recurring payments in your point of sale system. You then make a contract with your customer that specifies the amount to be paid and the card or account from which withdrawals will occur as well as the start and end dates, frequency of withdrawals, and duration.
Additionally, you will want to be sure to clearly set forth all terms and conditions and late payment policies.
3. Require a deposit
It is all too easy for customers to abort a project midway through, leaving you financially high and dry and forced to consider prolonged and costly measures, such as a lawsuit, to recoup what you have invested.
Requiring the customer to pay a substantial deposit at the beginning of the job turns them into a stakeholder with a lot to lose if a project does not reach fruition.
4. Incentivize early, ongoing payments and discourage late ones
Just as people respond positively to being rewarded with a discount for paying in advance, they appreciate the small monthly savings that they can gain from submitting their funds on time.
Alternatively, you can dish out a dose of pain for tardy payments by charging a minimal, additional late fee. Just be sure that you have clearly noted and disseminated your payment policy to your customer at the beginning of the job or service, to prevent any confusion or misunderstandings.
5. Automate the collection of payments
Modern software makes it virtually effortless to collect funds, as integrations can easily deduct the payments from the customer’s credit card at the intervals and frequencies upon which you have already agreed.
The system can even be configured to send out payment reminders and confirmation notices when the money arrives in your account. Real-time transaction reporting ensures that you always know the status of your customer’s invoice.
When you implement measures to make resolving an invoice on time and in full desirable and preferable, you can look forward to faster resolutions and much less of a need to chase down delinquent customers.
The added predictability and accuracy you gain from putting these strategies into practice will, in turn, leave you with increased peace of mind and more time to grow your business and provide excellent service to all of your clients.
