The more overdue clients you have, the greater chance that your business descends into financial trouble. Read on to learn how to ensure that your clients pay you on time.
Provide Multiple Payment Options
First, provide simple and accessible platforms for customers to make the payment on. The best way to accomplish this is to offer multiple avenues for payment to make the process convenient for your customers.
You could consider having facilities for more traditional payment methods like cheques or bank transfers and newer methods like digital or mobile wallets. The easier it is for your clients to pay you, the more likely they will pay on time.
According to research by PYMNTS
, 49.2% of businesses cite manual accounts receivable (AR) processes as a major issue and 80% of companies state that they will be looking at digital payments over the next 3 years. This shows the importance of your business adapting and offering multiple payment methods.
Another way to maintain cash flow is to encourage early and on-time payments by offering discounts. E.g., a 2% discount for early payment can incentivize clients to make payments on time. However, you should be mindful of offering many discounts because this can eat into profit margins. If you think this is a necessity you could bake it into the price of your product so it doesn’t affect margins.
Alternatively, you could charge clients an additional fee or interest for late payments. Both parties should agree upon your financial terms in writing, including deadlines and fees, so the client knows the consequences of delaying payment.
A friendly business relationship can go a long way to ensure you get paid on time. Ensure there is clear communication and understanding between both parties. Clients who value your work will make punctual payments to maintain your partnership.
A good way to do this would be to amend the language you use on your invoices and be courteous when requesting timely payments. Even simple statements like “please pay your invoice by the specified date” or “thank you” can increase the likelihood of getting paid on time.
Implement Background Checks
Before you take on any new clients, you must ensure they have a good credit score. To do this, you will need to conduct a comprehensive background check to assess the trustworthiness of potential clients. Be sure to inform them that you’ll conduct this check before carrying it out.
You can obtain a comprehensive view on the financial health and credit risk of potential clients with a company credit report
from Cedar Rose
. You can download reports about potential clients instantly and can also order a fresh investigation about a particular company. Armed with accurate information on your potential clients, you can make decisions more confidently, avoiding potential bad debt or unpaid/ overdue invoices.
Instigate a Collections Policy
If the above solutions fail, your last resort to ensure you receive payment is implementing a debt collection strategy. You should always consider the possibility of your clients not paying on time and have various strategies including using a third-party agent to step in when needed.
Trade Rate Tool
Cedar Rose has an innovative Trade Rate Tool that allows businesses to rate their payment experience with customers enabling other businesses to access reliable data on a company’s payment history before dealing with them.