How to get your customers to pay on time
One of the biggest problems and obstacles to successfully managing your business finances can come from your customers. If your customers are habitually late in paying their bills it can create havoc for your business finances and seriously stress your cash flow. The good news is that there are things that you can do that will help to correct this situation. Here is what you need to know about how to get your customers to pay on time-
- Send the bill out right away-Business finance experts recommend that as soon as you take an order you should send out an invoice. It has been shown that customers will pay an invoice sooner if they get it right after placing an order. The longer you wait to bill your customers the harder the time you will have getting them to pay. You can simply send out an invoice reminding your customers that their bill will be coming due. If the first invoice is not paid in full then it is important to send a second invoice about a week after the item was shipped. At this time you should make sure that it is very clear to your customers that they will begin paying interest on the bill if it goes more then 30 days.
- Be careful who you extend credit to-Many businesses make the mistake of thinking that they have to extend credit to every customer that applies for it. This is simply not true. You should be especially careful about extending credit to your customers that you don't know. You want to take the appropriate steps to insure that your customers will pay their bill after you have given them credit. Savvy business owners take the time to do a credit check on their customers so to make sure that they are not extending credit to customers that they will have a hard time getting payment from.
- Ask for deposits on orders-It has been shown that customers are far more likely to pay their bill in full faster if they have had to put down a deposit. Many businesses have instituted a policy of asking for deposits as a way of getting their customers to pay on time. In addition, it can not only help improve getting your customers to pay on time by asking for deposits it can also improve your cash flow since your business will not be on the hook for fronting all costs.
- Institute follow up procedures-It is surprising to learn that many businesses have accounts receivables that sit and go uncollected. You need to make sure that your business has policies in place as to how you will contact customers if they have not paid. This should include ways to follow up with customers who have missed payments, as well. When your customers know that you have a process in place to collect from them they are far more likely to pay their bills on time and in full.
- Be very clear about payment expectations-Another great method to make sure that your customers pay on time is to be clear about your payment terms. You want to make sure that your payment terms are very visible on any invoices that you send. It can be helpful to include the due date in large, bold font on any bill. In addition, you want to include any information about interest and penalties where the customer can easily see it. It can also be helpful to add an incentive on your invoice for early payment. Your customers may be a lot faster about paying on time if they know they get a discount on future purchases.