A survey from Melio showed that 59% of the small businesses who took part experienced late payments and 44% said late payments had negative effects. One late payment might not be a big deal, but repeated late payments across multiple clients can interfere with your cash flow. Zumvu presents the following guide to managing and preventing late payments while keeping your business customer-friendly.
Clear contracts eliminate room for disputes about when and how payments should be made. Include important details in the client contract, including:
Keep a copy of the signed contract for your records and give one to your clients, so you can refer them to it.
Let clients know your payment terms, so they understand when payments are due and how they need to pay. Consider your situation to determine your payment terms. Net payments are common and can vary to fit your needs. For example, Net 30 terms mean the payment is due 30 days after the invoice date.
Building personal relationships with clients can increase the chances of them paying on time. If your client is another business, find out who's responsible for paying invoices. Introduce yourself and work on making a connection.
Easily-understood invoices are essential for receiving payments on time. Make it easy to see the amount due, due date, and payment options. If you send invoices electronically, make them simple to send and receive. For example, a large PDF file might be difficult to send electronically. Compressing the file using the right PDF compressor tool makes it easier to manage. Test the tool to ensure it maintains the fonts, image quality, and other important image details, so it retains the integrity of the original.
It's common to punish late payments with late fees or by cutting off services. This might be a step you need to take for clients who don't pay, but you can sometimes prevent late payments completely by incentivizing those who pay early. You might give a small discount on payments made at least 10 days before the due date, for example. The small amount you lose can be offset by saving you the expense of chasing late payments or going without any cash for weeks or months.
Don't let late payments linger. Automated notifications can ensure you take immediate action when someone misses a due date. Following up an electronic notice with a call can help secure the late payment. You can also set up automatic notifications a few days before the due date. The client might simply forget about the bill, and the reminder may prevent them from being late with their payment.
Automate your invoicing and payment processes to simplify them for you and your clients. It's also important to protect clients' financial data when receiving payments. Using financial API bank account balance options like the Plaid platform ensures a secure connection for debit information and bank accounts that preserves the privacy of your customers.
With clear procedures in place and positive reinforcement for paying bills on time, you can decrease late payments from your clients.
