Times are tough enough, the last thing you want is existing customers taking forever to pay you, or worse not paying you at all. If you are constantly looking at your accounts receivables and losing sleep over when you are going to get paid, or your cash flow sucks, then take some time to check out the following tips.
1 Develop an accounts receivable strategy – this is not something where you can wing it, you need a plan. If you’re not taking it seriously how can you expect those late payers to? The trick here is to be consistent in everything you do including: how and when invoices are sent out, to whom they are sent, on what date after invoicing a follow up occurs, and how that follow-up is handled.
2 Consider using a billing service such as Freshbooks, which helps you send out professional looking invoices. This type of service automatically follows-up with customers who haven’t paid by the due date and tracks their payment history. If you invoice the same customer monthly, quarterly, or annually these services will allow you to set up recurring invoices, so your invoices always go out on time. They also let you see whether your invoice has been viewed by your customer. This is useful as after a week or so you can check and if it hasn’t been opened you can follow up, or send them another copy electronically or by snail mail.
3 Always send invoices out on time. It’s easy to put this task off, or forget about it for a few days or weeks. If you delay sending out invoices, then you are telling your customer immediacy is not important. Sending them out promptly implies urgency and you are more likely to get paid quickly.
4 Polite and professional invoices get paid faster. Apparently Freshbooks did a survey and discovered that a please and thank-you in your invoice will result in quicker payment.
5 Carrot and stick. The stick – you’ve probably seen invoices that state there will be an interest charge if they’re not paid within 30-days or whatever. This is a good idea as even though business rarely ‘fine’ their customers, it shows an urgency and seriousness about getting paid. Plus, if it’s an accounts department handling the payment they won’t want to risk getting into trouble with their managers by having to pay interest on outstanding balances. The carrot is offering a small percentage discount if payment is made early. You’d be surprised that as little as one or two percent can make a difference. Or perhaps offer a bonus discount off their next delivery.
6 Make it easy for people to pay. Accept all forms of payment including PayPal and credit cards. Not so long ago you had to have a merchant account to accept credit cards but these days billing services such as the one mentioned earlier will handle this for you. Many people prefer to pay by credit card, even some government offices will pay smaller invoices using credit cards.7
7 Get a deposit. Depending on the type of business you have, you may be able to ask/demand a deposit. This allows you to cover some of your costs up front.
8 Keep on top of invoices. Whether you use a service or not, never let an invoice go stale – the older it is the less likely you are to get paid.
9 Talk to your customer – Have a discussion with your client and determine whether they are having cash-flow problems, or there is some other reason why they are not paying you. Working at a personal level with a customer can often lead to payment faster than just sending emails, or repeatedly re-sending invoices.
10 Provide alternative payment plans – getting some money is always better than getting none, so offer your customer the option of paying off the debt using post-dated cheques, or regular credit card payments. Being solution oriented can often make the difference between having to write off a debt and eventually getting paid.
11 Be persistent – if a client isn’t paying then you must follow up by phone, not just once but frequently. Remember the squeaky wheel gets the oil. Always be pleasant but firm and never give up. If they are in financial difficulty, ask for monthly payments – get something.
12 Get legal. If all else fails don’t be afraid to get your lawyer to send a letter. It’s amazing how much influence a lawyer’s letter can have. Failing that go to small claims court never just let it go, it sends a bad message.
The bottom line is the more control you keep of your accounts receivables the fewer bad debts you will have and the better your cash flow will be.
This article is provided by Community Futures Okanagan Similkameen. Questions about your business? Contact their office at 250-493-2566.