Encouraging customers to pay invoices faster, or even on time, can be a nightmare for many small business owners. Customer collections are a necessary part of owning a company. If your customers don’t pay, you’ll be out of business. But, figuring out how to get invoices paid faster is a huge challenge. Worrying about bills and payments from clients takes away the time you should be using to focus on your business rather than bills. Oftentimes, reminding customers to pay their invoices can be awkward and uncomfortable, but you need the money to grow your business. Sure, factoring invoices is one way to get the money faster, but it’s not the only way. Here are some tips for faster customer collections!
Want Your Customers to Pay Bills Faster? Here’s How to Be Better at Customer Collections:
12 Customer Collections Strategies to Make Life Easier
- 1. Invoicing is the start – make it a priority
Immediately after you finish a project or fill an order, make invoicing your first priority. The faster you get the customer your invoice, the faster it is in their hands to make the payment. Waiting a day or week to invoice adds that time to get your invoice paid. Linking the completed project to the payment creates a sense of immediacy for your customer.
- 2. Establish clear payment terms
Writing a contract that describes when you will finish a project and when you expect them to pay the invoice offers protection for both you and your client. You’ll want to apply some specifics to this. For example, express that you expect the total invoice amount to be paid in 14 business days.
- 3. Stick to the schedule from the terms
If a client is expecting an invoice from you within a certain time frame that you both establish in your payment terms contract, stick to that schedule. If the terms state you will bill them within one business day from the completed project or filled order, you should be sending them an invoice within one business day. You’ll be able to hold them accountable for paying the invoice on time by holding up your end of the contract.
- 4. Offer incentives for early customer payment
Everyone likes to get rewards, it’s part of human nature. In your payment terms, you can include an incentive for clients to pay on time. For example, to get your payments faster you can offer a credit of 3% off the invoice for clients who pay within seven days of receiving the invoice, but…
- 5. Don’t charge a late fee
Contrary to a lot of beliefs, having late fees may not be that beneficial in the long run. Penalties will not help your relationship with your customer, and strong relationships is the way to have long-term, repeat customers. According to Nellie Akalp, CEO of online incorporation filing service CorpNet.com, “if someone isn’t in a hurry to pay your bill, they probably won’t be in a hurry to pay your late fee either.” Not only will you be damaging the relationship you would have hoped to establish, you probably won’t get your money faster anyway.
- 6. Be polite and patient
Deciding how or when to ask a client for payment can be hard. If it has only been a few days or a short amount of time, try to refrain from calling the person or department in charge of paying invoices, even though you need immediate pay. A first recommended step would be to send an email reminder. You can automate this through your system. Just remember your “please” and “thank you” and don’t let your emotions get the best of you.
- 7. Go paperless
Online payment tools will make it easier for your customer to pay you, increasing the likelihood that they’ll do it in a timely manner. In addition to the simplification of the process for your client, writing checks is an extra step that gets in the way of a payment being made. Having an electronic system eliminates this added step.
- 8. Be flexible
Although having an electronic payment system may be easier for your clients to complete payments, you’ll want to be flexible with the payment type for other clients, because let’s face it, everyone is different and we all have our preferences. If you’re able to accept payment from a credit card, check, or direct deposit, that’s one less excuse for your clients missing payment deadlines. Just because you “go paperless” doesn’t mean you should get rid of the paper check option. After all, some customers are more familiar with that payment method.
- 9. Recognize and verbalize
Sending a quick thank you email or a gift annually to clients who have been beneficial for your company helps show that you appreciate their business. It could be as simple as a coffee mug, pen or t-shirt. This does not directly get customers to pay you faster, but it builds a relationship in which they will want to show you respect by paying on time.
- 10. Discuss payment terms
Consider revisiting and revising your current terms with your client. You don’t want to lose a client because they aren’t meeting deadlines. You also don’t want to be bullied and not get paid when you expect it. Revising terms will re-establish what should be expected from both parties and benefit you by keeping the client while addressing the problem.
- 11. Know your customers
Before you take on a project or new client, you might want to look into their credit history. If you have an interest in factoring, they will be able to provide the credit history for you. As a professional business owner, you deserve to work with other business professionals. Sometimes it might be necessary for you to stop working for someone unprofessional either temporarily or permanently.
- 12. Keep open communication
It’s important for you to be able to understand your customer’s concerns and needs, and they should be able to understand yours as well. If you keep an open, honest dialogue between the two parties, it’ll be easier to discuss issues such as late payments without ruining the relationship.
Have you tried these suggestions but they don’t seem to be working for your business? Maybe its time to learn about how invoice factoring works. Start factoring your invoices so you don’t have to wait for clients to pay you. By getting the cash flow that is yours to operate, you won’t need to take out a loan to meet expenses such as payroll. Call us today for a free quote.