This article is part of our Business Startup Guide—a curated list of our articles that will get you up and running in no time!
More than 30 percent of small and medium-sized businesses surveyed by Sage say late payments are impacting staff pay, company investments, and supplier relationships. When businesses have trouble getting their customers to pay invoices on time, it can really affect a business’s cash flow, and even their ability to survive.
If your business is growing and you’ve made a ton of sales, it might look on paper like everything is great. But until those customers surrender their cash and pay their invoices, you can’t use that revenue to pay your own bills.
But what can you do to encourage your customers to pay up faster? Start with these six simple tricks.
1. Be careful: Know your customers
Net terms are not for everyone. Plain and simple.
There are some customers who you can trust to pay you and some you cannot. Your job is to become an expert in figuring out which is which. In most industries, you as the business owner can choose whether you require payment at the time of service or delivery, or if it’s better business to issue an invoice and wait.
Do your due diligence. Find out as much about a customer as you can before extending credit. Pull their business credit report to see how they’ve financially performed in the past. Have each customer apply for credit and make your credit application specific enough that you can do quality research on them. Ask for trade references so you can get a sense of their past payment behaviors.
2. Be clear: Spell out your terms
Identify your standard payment terms (30 days? 45 days?) and spell out your late payment consequences. Leave no room for questions, and eliminate the possibility of any “he-said, she-saids.” If you offer different terms to different customers, make sure you’re not saying one thing to one customer, and putting something else on your website, for example.
Word your invoice as clearly and simply as possible. Use a professional looking invoice template. Don’t overwhelm your customer with a ton of information—be concise and to the point. Put your customer’s name on the invoice, not just their company’s name, if you’re selling B2B. Don’t use internal jargon or vague descriptions whenever possible so it’s abundantly clear what you’re invoicing for.
You want your customer to get the invoice, understand what it’s for, and be able to tell who authorized the work or product purchase as quickly as possible. Avoid general phrases like “due in three weeks” and put an exact due date on your invoice. The easier you make it for your customer to cut you a check, the more likely you’ll be paid quickly.
3. Be polite
Did you know by simply adding a “please” or “thank you” to your invoice, you can increase your chances of getting paid by five percent? Being polite can go a long way.
Be friendly and warm in your invoices. Remember, the customer hasn’t paid late yet. By being cordial, customers will have a more positive response to your communication and you have a better chance at being atop their payment priority list.
4. Make it easy for customers to pay
The easier it is for people to do something, the more likely they will do it. It’s time to embrace quicker payments methods for your customers. First, invoice faster. Don’t send paper invoices, don’t fax invoices if you can help. Save the paper and the lag time and email them.
Take checks, accept credit cards, and PayPal. Make online payments available, and make sure they’re mobile optimized options so customers can pay right from their smartphones. Putting a link to a payment processing form in an invoice is a great way to speed up payments. The trade-off there will be credit card or processing fees, but weigh the options and decide if it’s a good trade-off for your business.
Put your contact information right on your invoice. Make it easier for your customers to contact you if they have a question about a bill. How many times do your customers not quite understand something and set aside your invoices until they have time to track down your phone number?
5. Be flexible
There are times when customers hit difficult financial spots. We’ve all been there.
You’ve been cautious when extending credit, but you didn’t see this coming (and neither did they). Sometimes it’s O.K. to work with customers whose cash is momentarily tight. You just have to be the judge in deciding if this is habitual or situational.
Don’t indulge the habit, but help out those who’ve hit a rough patch. Look at offering these customers installment plans. Although you won’t receive your entire sum up front, it will allow you to start receiving cash and will help guarantee that you will, in the end, receive what you’re owed.
When you work with a customer to develop a plan that meets their needs financially and still gets cash flowing into your system, you’re saving yourself. Installment plans, in fact, are at times the difference between you getting paid or not getting paid at all. Option number 1 is always the best, even if you have to be flexible with the terms.
6. Be consistent
The thing to remember when extending payment terms is the human element. We are busy people who easily get sidetracked and easily forget. It’s not unheard of for a customer to receive an invoice, place it to the side, and unintentionally allow it to get lost under a pile of papers.
Do them a favor and remind them. If it is a week before payment is due and you still haven’t received anything, don’t hesitate to send them a friendly reminder email or letter. Keeping yourself on their radar will only help increase your chances of getting paid.
Looking for a free invoice template? Here are a few to help you get started.
from Bplans Articles http://bit.ly/2TIpanA
No comments:
Post a Comment