Customers who make late payments can be stressful for any business, let alone during the summer period when work can be a bit slower than normal. With many small-business owners only coming back to work now, having taken a longer break over the school holidays and January, slow-paying customers can mean the difference between surviving and not.
Late payments can cause serious cashflow issues, affect future budgets and take away from valuable work time with all the extra work that chasing up bills creates. How can you be expected to run your business, on top of being the after-hours collections agent?
To help you get back to work more quickly, here’s some of the most effective ways to deal with slow payers:
Send invoices immediately
It’s tempting to put off invoicing until the end of the day, or worse, the end of the month, and complete it for all customers in one go. By changing this habit and invoicing immediately after completing a job, you increase the likelihood of being paid faster. By the time it gets to the end of the month, your customer has forgotten they owe you money and your cashflow begins to suffer. Send it while the work is fresh on your customers’ minds so there’s less room for back and forth.
Make it almost too easy to pay
Even the smallest friction points in the payment process can get in the way of getting paid on time. The simpler you can make it to pay, the less likelihood your customer will have a reason to put paying you in the “later” basket. Mobile apps like Invoice2go make it easy to send a professional invoice immediately when the job is complete, and collect payment online straight through the invoice itself. When your customers press the “Pay Now” button, they can complete the transaction on the spot, from wherever they are. Some may still wait until the deadline, but those who can pay immediately, will do so just to get it off their mind.
Allow customers to pay how they want to pay
Accepting a range of payment types gives customers more flexibility, and the ability to pay in a way that suits them best. Consider offering the full range of payment options, including credit and debit card, EFT, cash and PayPal. It’s tempting to avoid payment methods that carry a fee, however, credit cards give customers extra time to make a full payment on their terms, without holding things up on your end, ultimately improving your cashflow.
Be proactive about tracking invoices and following up
You may be on top of your deadlines, but that doesn’t mean your customers are. Keep track of when invoices are due and send a reminder a few days in advance. Giving slow-to-pay customers a gentle nudge not only improves your cashflow, but it can also be greatly appreciated when handled the right way.
Tighten your payment terms
Some people are hardwired to be late, and it becomes a habit if you let it. These are the folks who are often late to work, always delayed for social functions, and are also late to pay. By adjusting your payment terms from 30 days to, say, 15 days, you increase the chance they’ll pay “on time.”