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How To Receive Prompt Payments From Your Customers

For a business to operate seamlessly and grow, it must receive payments. Ideally, they would receive their payments on time. The reality is that this is rarely the case. Payments are critical to pay operational expenses such as employee salaries, equipment rental, leasing contracts, etc.

When your clients are late in making their payments, your cash flow begins to suffer as it will create gaps. It goes without saying that you and your business do not work for free. However, it looks like many just might be. 

According to the Independent Economy Council, 72% of self-employed professionals had invoices that had still gone unpaid. Some business owners resort to diving into their savings, acquiring a short-term loan, or getting a line of credit. Although these solutions address the dilemma on a short-term basis, it certainly is not a long-term solution. 

How To Resolve Late Payments

  • Prevent Invoice Disputes By Using Estimates

Say your customer does not agree with the charges on our invoice. This will inevitably cause a delay in your payments. Then you have to approach your customer about the late payment, making it a very awkward situation. 

  • Invoice Without Delay

As soon as the product has been received and the services rendered, that is the time to submit your invoice. Not only is it professional, but you also set the expectation for your customer that you do expect to get paid. 

If you choose to send the invoice sometime later after the product or service has been delivered, it will set a precedent in the customer’s mind that you really don’t care about being paid on time. Some clients might take advantage of that and conveniently “forget”. To ensure that your customer has received your invoice, send them a friendly reminder via e-mail or letter. 

  • Make Everything Clear

Every one of your invoices should clearly spell out both the payment terms and the date it is due at the very top. This will greatly improve the possibility of being paid on time. Within the invoice itself, describe in detail what the product or the service performed was. Show what date it was delivered or performed. 

Use the best invoice automation tools at your disposal, instead of a traditional paper system. With an automated system, you will be able to automatically track your invoice payments easily. 

  • State Your Payment Terms Clearly

Ensure that you state clearly on your invoice when you expect your payment. By indicating your payment terms, you are opening the doors for later conversations, including charging interest and late fees. 

Generally, the time frame to expect payment in full is 30 days. However, in our current digital age, they can certainly make their payment online by using their credit card. Also, if you are going to charge a late fee or interest, you must indicate that clearly on the invoice.  Put the date on which interest will begin to accumulate. This would definitely encourage a customer to pay on time. No one wants to overpay and allow it to impact their bottom line. 

  • Take Multiple Payment Methods

Just like accepting multiple payment methods could potentially grow your customer base if you had an e-commerce business, do the same for your business.  Catering to every population based on their preferred method to pay will definitely increase the chances of getting your payment quicker and on time. 

  • Have A Non-Payment Follow-Up

Once you have detailed payment terms, you can use them to guide you on the first step of pursuing an unpaid invoice. Your first step is to send a friendly reminder via e-mail. A brief phone call that has a friendly tone will work too. 

If you are already using a certain type of payment or accounting software, use that to completely automate this step. Not only will this save you time and a lot of headaches, but it can also be a really efficient way to gently remind your clients that their payment is due, without it turning into a huge problem.

If this method does not work, consider making a phone call. The conversation will lend itself better to communicating any issues or misunderstandings, plus it builds trust and relationships. 

If this continues to carry on for several months, you will need to schedule more times to send the message. Whether it be calls or e-mails or resubmitting your invoice. Don’t give up until you have reached your goal. 

  • Leverage

Your need to get paid and your consumer needs what you have to offer. Consider holding back some of the work you have been doing for the late-paying client. You can also refuse to do further work for this client. You can resume work once the payment has been received or you have come up with a payment plan.

Establishing this expectation from day one will lessen the probability of this issue happening.

  • Hire A Debt-Collection Agency

If all of your efforts to contact your client have yielded zero results, you may need to hire a debt collection agency. Shop around to find the best to suit your business. 

What you need to know is that they do take a 30% cut from your invoice. This of course should be your last resort as this may potentially sever your customer relationship. In spite of this, this could be the final effort to finally get paid. 

A Balancing Act

When it comes to dealing with unpaid invoices, it can be a difficult balance. If this client happens to be one of your most important and long-standing ones, do you think that being more firm could hurt your chances of getting more business?

There is no easy answer. But when in doubt, just keep things friendly and professional at all times. If you can turn a situation where they actually do want to pay it back and not just feel pressured, then you can see your invoice be paid a lot quicker.

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