There’s nothing more frustrating – not to mention potentially harmful to your business – than to have a customer who doesn’t pay on time or in full. It can significantly affect your cash flow and your ability to pay your own bills if you’re dealing with a customer who owes you a large sum of money or multiple customers are late in paying you.
You can implement strategies that will help you stay out of a situation where you have to call or take action to collect from customers. Let’s take a look at a few.
Require a partial payment in advance
This is only reasonable if you’re going to have to pay for supplies before you start a job. A 50% upfront payment is standard in some industries. It may be difficult to start asking for this from long-time customers, especially if they always pay on time. However, it can be a wise policy to implement for new customers and waive for those customers who never have payment problems.
Put regular customers on a retainer program
If you have customers for whom you regularly do the same kind of work, then you might want to set up monthly billing – preferably through automatic debit. Look at the last year or two’s worth of invoices for them and determine what they pay each month. You’ll need a contract outlining what the retainer covers, but this can help both you and them better budget each month.
Call customers before their payment is due
This is not a call directly asking for payment but a customer service call to ensure they were satisfied with the work and find out if they have any questions or concerns. During the call, you should call to ensure that they’re received the invoice and know when it’s due. This may serve as a gentle reminder if the payment has slipped their mind.
One of your senior team members or co-owners should make these (and all “collection”) calls. A company’s leadership too often delegates them to clerical employees. However, hearing from the project or account manager they know or someone with a stake in the business can spur some people to pay.
If you’re dealing with collections issues that are threatening the health of your business, then there are options available to help you collect the money you’re owed.