November 1, 2011
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Company Culture
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As an entrepreneur you know how crucial cash flow is to a business. On that same note, few things in the business world are as frustrating as a client who doesn’t promptly pay. Try as you may, you, will at times come across people who are slow to pay or try to occasionally skip out all together. The good news is that there are things you can do to get your clients to pay faster.
1. Set the stage early. Get your payment policy out in the open at the very beginning. During the sales process, before the contract is even signed, explain and document (in the contract itself) your terms and what the expectations are for payment. If there are terms that need to be negotiated, always do it during the sale, not after.
2. Establish an internal process for payments. Be sure that a formal payment process is followed every time and for every customer. For example, if you offer net 30 terms and haven’t received payment on the 31st day, send an e-mail saying that payment hasn’t arrived and ask the status. After 35 days, make a phone call. After 45 days, send a letter (via snail mail) and after 60 days, send a certified letter explaining the penalties for late payment and what is due. Once payment has become 75 days delinquent, notify a collection agency and get them involved. Having this policy in place will help ensure your people know what to do and when to do it.
3. Include a self-addressed stamped envelope. Why this works is beyond me, but it does! When sending an invoice, include a self addressed stamped envelope to send the check back to you. In my experience, these payments always come back faster.
4. Take credit cards. Skip being the banker, which is what you are really being when you allow a customer to take their time paying you. Instead, let the credit card company be the banker. You can do this by offering credit card payments. Keep in mind that you will have to pay a 2 to 3 percent credit card fee in many cases. However, having 97 percent of the cash right now is far better than having 100 percent of it a year later.
5. Disarm the excuses. Getting excuses for a late or lack of payment is common. The two most common ones are I never received the invoice (or some variation of it) or I disagree with the bill. So, nip this in the bud by calling them five days after you send out the invoice in order to inquire that they have in fact received the invoice. Ask them if they have any questions or concerns about the invoice and make sure they are aware the payment is due in 30 days.
You may still have one or two slow-paying clients after incorporating these steps into your formal payment process. But I can assure you that you will, without a doubt, speed up the amount of time it takes you to get paid by the majority of them. It’s a process that is well worth the effort in order to keep the cash flowing and the frustration at bay!
Check your balance, review recent transactions and pay your bill on the go.
Lisa Kerr 7 months ago
Make it easier for them to pay. Equip them with tools to not only pay, but ease vendor pain so that payment, ACH, software sync, all becomes seamless not only for the collecting org, but the paying party as well! Bill.com does a great job of streamlining for both the business and vendor, as an example.