Satisfied customers are ideal … but so are paid invoices. Read on if you have slow-to-pay customers and you’re not sure how to get them to pay up.
Your customer is satisfied — but a month has gone by, and your invoice is still outstanding. You’d like to work with the customer in the future. So how do you get your money without losing the customer? Here are two strategies that may help:
1. Make it a habit to clearly and promptly communicate with your customers. On the day after the due date, send an email with your original invoice attached, or fax a copy. Then call to make sure the duplicate was received. While you’re talking, ask whether the customer has all necessary documentation and find out why payment is delayed. If the customer is happy with your performance, mention that you won’t be able to complete new contracts until past invoices are cleared up. Make sure to request payment by a specific date.
2. Be willing to negotiate with your customers. When customers fall on hard times, you may still be able to find a solution that will work for both of you. Some options include:
• Ask for a portion of the outstanding balance.
• Request that a specific invoice be paid immediately, with the remainder due at staggered intervals.
• Establish a short-term payment schedule for a series of smaller checks.• Offer to convert the receivable into a formal note with an amortization schedule and interest rate.
Setting credit terms, limiting the amount of credit you’ll extend, checking ratings and requiring down payments can prevent collection difficulties.Many service providers can implement terms with which they do not deliver the final service without full payment. As a tax and accounting firm, most of our recurring clients are on automatic payments taken from their bank or credit card on the 1st of the month before we have begun work on their project. For tax returns, we do not release the return until payment has been made. This won’t work for every business, but there are ways of managing your receivables so that you do not have to make as many collection efforts. If you’d like help establishing procedures for receivables management in your business, give us a call.