When your customers don't make their payments on time, it can impact your business in many ways. You may not have the capital you need to purchase additional inventory, pay your own bills or expand when you need to. Fortunately, there are steps you can take to reduce the impact of late payments on your cash flow.
1. Make sure new customers understand your requirements.
Before performing any service or delivering a product to a customer, make your payment policies clear. When customers understand these policies from the beginning, they are more likely to comply. Consider providing customers with a copy of your payment terms in writing so you can be sure that they are informed.
2. Offer as many payment options as possible.
Customers are more likely to pay their bills on time if they have plenty of convenient ways to do so. If possible, allow your customers to pay in-person, over the phone, by mail or online. Accept as many different forms of payment as possible, and consider offering a payment plan for customers who cannot pay their full balance immediately. Make sure that customers are aware of all of the different ways to pay by including a list of payment options on the original bill and each reminder notice you send.
3. Send regular reminders to customers with outstanding balances.
Sometimes customers fail to pay what they owe because they simply forget about the bill or lose the original copy. Send regular reminders to customers via mail and/or email so they will be more likely to pay. If customers still don't pay after a few reminders, make a phone call to encourage prompt payment.
4. Change your payment terms.
If you have ongoing problems with late payments, consider changing the way you require customers to pay. For example, you may begin requiring payment at the time of service, or you may require customers to provide their payment information upfront so you can debit the payment automatically on the due date. You may implement this requirement for all customers or just for those customers that haven't paid their bills on time in the past.
When a customer won't pay after you have made repeated attempts to collect, it may be time to take legal action. Begin by writing and sending a certified demand letter. If this doesn't work, consider hiring a collection agency or taking the customer to court yourself.
Late payments can be problematic for your business, but following these tips will help you recover as much money as possible so you can continue to grow your business. For more small business finance tips, please contact Padgett Business Servicestoday.
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All content posted on this website or distributed by SmallBizPros, Inc. DBA PADGETT BUSINESS SERVICES is intended for informational purposes only. To determine whether these concepts are appropriate for your business, you should seek advice from a PADGETT BUSINESS SERVICES® representative or an independent advisor before implementation.