A common challenge that all businesses face, be it a conglomerate or a small organization, is a delayed payment from a few of its customers. In spite of sharing invoices on time, there is no guarantee of receiving the payment as per the schedule, which will impact your cash flow situation.
Below are some of the strategies to get paid faster and on time. Add those to your billing routine and attain prompt payment. In a slow economy companies are slow to pay bills and small business (SMEs) are often hit the hardest.
1. Provide Multiple Payment Modes
When you provide only a single mode of payment mode then you are limiting yourself. For instance, writing a cheque won’t be convenient for all organizations as the accounts payable department is dependent on a signing authority or may have a monthly schedule for issuing cheque. To make sure your payment doesn’t get delayed because of any of these reasons, it is wise to provide multiple payment modes like bank transfer, cash, credit cards or mobile payments.
2. Add Due Dates in Invoices
Don’t forget to include a due date when you send the invoice. Inform your client that past-due bills will be charged a late fee. You can set the terms of the finance charge, such as $25, for any invoice past 30 days. Include the percentage amount, like 1 percent of the invoice amount for each month.
3. Appreciate Early Payment
The inverse approach to the late fee is acknowledging clients who pay early. Express your gratefulness by offering clients a discount on future purchases. You can also set trade terms, such as clients get a 1% discount if paying within 10 days.
4. Charge Up Front
As a service provider, you’re not duty-bound to extend anyone a credit. You can charge some expenses at the beginning of a contract. For instance, you can charge up to 50% of the total payment up-front, and the rest of the time of completion, specifically if you’re working with a new client.
5. Automated Email Notification
Some ERP software enables your finance team to define business rules that automatically trigger email alerts. These email alerts can be internal notifications to help your accounts receivable team follow up with customers who have outstanding invoice payments. Email alerts can also be sent directly to the customer to remind them about the late payment and notify them about late payment fees being applied unless payment is made promptly.
6. Put Customer Accounts On Hold
Your finance team can temporarily put a customer account on hold until overdue payments has been made by the customer. Your finance team can define limits per customer account to ensure the overdue balance does not spiral out of control. This will help reduce cash flow risks.
Why good strategies to get paid faster is important?
There are many reasons a business can suffer cash flow problems. Accounts receivable means your company has made a sale but have not yet collected the payment. If you accounts receivables is not managed effectively, it may put your business at risk. When you implement new strategies to get paid faster, remember that it’s important to notify your clients beforehand when you implement a change in your payment policy. Resend the invoice with a kind reminder email that any payments received after due period will be charged a late fee.