Create and Enact Policies to Ensure Customer Payments
One of the biggest problems a company has when selling products or services to another business is invoicing and getting paid. You need to get paid timely. Late payments impact your cash flow, which can affect when you pay bills or produce new products. Fortunately, there is much you can do to get your customers to pay you promptly. This article offers nine tips that should make invoicing more effective.
1. Keep an Eye on Payment Behavior
Some clients start off great, paying their bills on time. However, they can eventually start slipping. Payments come later and later, until their tardiness affects your startup. That’s why you need to keep an eye on their payment behavior. Whenever a client fails to pay on time, talk to them and re-evaluate their terms if necessary.
2. Have Clear Policies
To properly enforce your policies, they must be clear to you and your clients. Credit limits, collection policies, and more have to be thoroughly and clearly written out and legally checked. Speak with lawyers and coordinate with your accountant to make sure your terms do not hurt your business while simultaneously allowing for as many responsible clients as you can manage.
3. Get Down Payments and Deposits When Appropriate
As you grow your business, you’ll get large orders from new and existing customers. It can be tempting to pounce on the project and make it work, no matter what, but you need to embrace caution. For large projects or custom work, ask for a deposit or a down payment. You should also do that for people who have a less than ideal credit history.
4. Send Invoices Immediately
If you want people to pay on time, you need to send your invoices out on time. Some startups like to send out invoices during a specific time of month, and that is OK. What is important is you send out those invoices as soon as you can. The sooner your clients know how much they owe, the sooner they can pay you.
5. Make Paying You Easy
One of the biggest barriers to getting paid quickly is having a limited number of payment options available. The more options you have available to clients, the more likely you are to be paid. Different credit cards and multiple currencies are a good start. If you are particularly daring, you could even elect to accept cryptocurrency.
6. Limit Orders from Those Who Owe You
Some companies will have trouble paying you, and to a certain extent, that is OK. Stay in touch with them, and remind them of their obligations. However, you may decide to not extend that courtesy by continuing to fulfill orders or providing them additional services. You may decide to reject any other orders from that client. Additionally, clients who have had issues paying on time in the past should be put on probation. Even if they owe you nothing, they should be held to stricter policies, such as full payment up front until you are confident they can and will pay you on time in the future.
7. Diversify the Customer Base
One of the best ways to keep your small business safe from late payments is to diversify your client base. The more clients you have, the less damaging to your process it will be if one or more fall behind on their payments.
8. Hold Off on Commissions and Related Bonuses Until Paid
Some entrepreneurs make the mistake of rewarding their sales team with commissions and bonuses the moment a contract is fulfilled. That can put your company in a bind if you are not paid on time. Make sure everyone in the company understands that a sale is not complete until the company receives payment. That will keep expectations under control and incentivize employees into making collections on of their priorities.
9. Offer Discounts for Early Payments
Being paid early is great. You get your money sooner, which means you have a better idea what resources you have available, which can help you plan better. Fortunately, there is a good way to entice clients into paying early, and that’s to offer a discount. Even a small 2 or 3 percent discount can get your invoices fulfilled quickly.
The Bottom Line
Your primary goal as a business owner is to get paid. Without sales revenue, your business will not last long. Do not feel guilty for enacting policies and enforcing them. You need to be properly paid for the value your small business provides. To not try to get paid is not only unfair to your business, but it is unfair to the people within it who put in the effort to create your offering.
About Universal Funding
Universal Funding is a nationwide invoice factoring solutions leader, supporting growth-focused businesses with scalable factoring solutions. With its invoice factoring, payroll funding, and purchase order financing services, Universal Funding provides clients with the working capital needed to grow and support their businesses without taking on new debt. Ranked as one of the nation’s top invoice factoring companies, Universal Funding provides cash flow financing for businesses all across the United States.