Having late-paying clients can be frustrating, but it’s not an unusual phenomenon in business. In fact, a recent survey found that New Zealand companies experience an average delay of 5.6 days in the payments they receive for overdue invoices.
A delay of a few days might not seem like such a big deal initially, but repeated late payments from several clients can be detrimental to your business. Fortunately, there are many things you can do to combat this problem and make sure clients pay on time.
Here are a few strategies that we’ve found extremely effective:
1. Choose reliable clients from the start
Becoming more discerning about the people who choose to work with can save your business from a lot of trouble in the future. So, before you begin a new client relationship, run a thorough credit check on your prospect first to see if they are reliable.
If you discover that their credit score is surprisingly low, conduct more research to find out why. Also, determine if they were able to correct any financial mistakes they may have done in the past.
2. Opt for upfront payments whenever possible
Don’t be afraid to ask a client if they can give you payment upfront, especially if you’re filling in a sizeable order. This way, you can save time and you won’t have to worry about chasing down a large chunk of revenue because of an overdue invoice.
3. Make your payment terms clear
Before you sign off on a deal, you need to establish clear and specific payment terms with your client. Set aside time to discuss all these conditions together and make revisions if necessary. The goal is to ensure that both parties understand and agree on all payment terms from the start so you can avoid overdue invoices and other such problems later on.
4. Invoice immediately
Streamline your processes so that you can send out invoices as soon as you complete a sale. This will give your customers more time to prepare their funds and arrange for payment.
Also, it would be a good idea to set a standard schedule for payments so it will be easy for clients to remember their deadline. For instance, you can inform them that you expect to be paid on the 15th and 30th of each month.
5. Offer convenient payment options
If you have a confusing and overly complicated payment process, your clients will most likely put off paying their bills until they eventually forget about it. Avoid this by making the process as simple and convenient as possible.
Offer multiple payment options to accommodate different types of customers. For instance, you can include a link to an emailed invoice so clients can pay online. You can also include a note that you accept payments via cheques or credit cards for people who prefer those methods.
6. Send polite yet direct reminders
Don’t hesitate to follow up and remind clients of their unpaid invoice, especially if the deadline is just around the corner. However, make sure that you do this in a professional and polite manner. Your goal is to maintain a good rapport with clients even when you encounter minor debt collection issues.
7. Offer rewards for early payments
Positive reinforcement can be a very effective tool in debt collection. Consider offering your clients discounts for paying their bills early. Perhaps you can deduct three to five percent from the total amount. This is enough to draw a positive response from your customers without putting a large dent on your profits.
When in Doubt, Call the Experts
If, after implementing these steps, you still have clients who are unable or unwilling to pay their bills, you need to call the professionals.
Here at Slater Byrne Recoveries, we specialise in collecting debts that no one else can. We’ve handled collections from a wide variety of industries, so you can rest assured that we will be able to cater to the specific needs of your business.