If you're a business owner who specializes in providing goods and services you've likely dealt with a few slow paying customers at one time or another. This practice can be especially difficult if you use an extended payment period such as 30 or 60 days because it can substantially prolong the time it takes you to get your money. To deal with slow paying customers, invoice factoring is a useful tool that can help you receive the funds you're entitled to immediately.
Managing Receivables
One of the best ways to handle slow paying customers is to have a dedicated person or staff that manages your receivables. If you have several customers who receive invoices all at once it can be difficult to stay in contact with them to make sure that they submit their payments on time. Many customers may simply forget about the outstanding invoice after receiving it so having an employee who contacts them to remind them of their bill can be helpful to getting your payments in a timely manner. It's also important that the receivable clerk shows respect and good manners while speaking with the customers. A rude or harsh interaction may cause your customers to find other businesses to work with.
How Invoice Factoring Can Help
But what if you've already been supervising your receivables efficiently and you're still having trouble collecting on time? This is where receivables factoring can be beneficial. Through invoice factoring, you can sell the value of your outstanding receivables to a funding firm who will then advance you the majority of the value in cash. The third-party firm then becomes responsible for collecting on the debt. However, in order to qualify for invoice factoring, you must be working with customers who pay their invoices. It's okay if they pay slowly, as long as they eventually submit their payments. The reliability of your customers serves as the guarantee for your factoring advance.
Signing Reliable Customers
As you go forward in your business try to sign customers who will pay their invoices on time. Issue written contracts that stipulate a payment period and check your clients' credit ratings before agreeing to work with them. If you shift your clientele to focus on those who have a record of paying their invoices rapidly, you'll be able to avoid much of the hassle of collections.
Slow paying customers can cause headaches for small business owners. Using invoice factoring to deal with slow paying customers can help you get your money right away even if your clients are late in paying you.
