Cash flow is king when running a business, and you cannot pay the bills until your customers pay you. But it's crucial to find a way to get paid and not damage relationships with your customers. Being upfront with your payment policies can be very helpful in establishing expectations.
Let's say your customer is satisfied — but a month has gone by, and your invoice is still outstanding. You would like to work with the customer in the future. So how do you get your money without losing the customer?
Here are a few strategies that may help:
Make it a habit to clearly and promptly communicate with your customers. On the day after the due date, send an email with your original invoice attached. Then call the next business day to make sure the duplicate was received. This gives you a chance to ask whether they have all necessary documentation and find out why payment is delayed.
If the customer has any pending work with your company, mention that you will be happy to complete new work after the past due invoices are cleared up. Make sure to request payment by a specific date.
Be willing to negotiate with your customers. When customers fall on hard times, you may still be able to find a solution that will work for both of you.
Ask for a portion of the outstanding balance to clear up the account.
Request that a specific invoice be paid immediately, with the remaining invoices due at set intervals.
Establish an automatic monthly payment schedule.
Offer to convert the receivable into a formal note with an amortization schedule and interest rate.
Setting credit terms, limiting the amount of credit you'll extend, checking ratings, and requiring down payments can also help prevent collection difficulties. If you would like help establishing procedures for receivables management in your business, give us a call.