The old adage “Time is money” definitely applies when it comes to collecting payments from your customers. When they hold off paying what they owe you, you find yourself without money you need to continue running your business.
Rather than watch your company's bank account run into the red, you must take proactive steps to encourage your clients to pay you on time on a regular basis. These tips can help you remind your customers of their obligation and keep your cash flow intact.
Sign a Contract with Each Client
Before you start a single project for a customer, you should implement a contract that defines how and when you will get paid. Without a contract, it could be your word against that of your customer if a dispute arises.
By having a contract in place, you both are protected if questions about payments ever becomes an issue. A contract should include terms for:
- How much you charge for services or products
- When payments should be remitted
- What services or goods may have additional charges
- What penalties you may charge if payments are late
A legally binding agreement in writing can compel your customers to uphold their end of the bargain and pay you on time without delay.
Send Out Invoices
Even with a contract in place, you should still send out invoices dates for payment are approaching. An invoice further explains the terms of your providing a service or product. It also provides proof of what customers have been paying for during their business ties with you.
You should send out an invoice to each customer no less than a week to 10 days before a payment is due. This time frame gives the client enough time to write a check or get the amount sent to you promptly.
Accept Electronic Payments
Many businesses today take online payments from customers. You can join the ranks by allowing your clients to pay online with an electronic check or by using their credit or debit card.
Online payments are easy to do and can be credited instantly to your account. They also save you money because you do not have to buy copy paper, stamps, or envelopes.
Send Out Reminders
Your customers may be just as busy as you are. During their rush, they may forget to slip a check into the mail and take care of their invoice with you.
When you want to get paid as quickly as possible, you can speed up this process by sending out reminders. A politely worded reminder can compel a customer to drop whatever he or she is doing and get the money sent to you immediately.
However, if you have long-term customers that you allow several months to pay their bills, you should forgo the reminders in favor of another solution like factoring. By factoring your long-term customers' invoices, you get paid faster without having to wait the weeks or months for the full amount to be remitted to you.
Offer Discounts for Early Payments
Most people love a good bargain, particularly when it comes to paying their bills. You can keep your customers coming back when you offer them a discount for paying their invoices early.
If, for example, they pay before the end of 30 days, you may offer them a five percent discount on their bill. This small, yet gracious allowance helps them view you in a favorable light. You also recoup this discount back by guaranteeing their future business.
Waiting for customers to pay their unpaid accounts leaves you without the money you need to run your company. You can get paid faster by using these strategies when billing and communicating with your clients about their invoices.