8 Debt Collection Tips to Get Paid Sooner
It can be difficult asking a customer to pay their overdue invoice. Unfortunately, collecting outstanding invoices is inevitable for any business that grants credit. However, it should never be a significant activity. By following these 8 tips, I hope your business can get customers to pay their bills by the due date or, better yet, sooner!
Tip 1: Transparent Terms
If you are in the construction industry, the clarity and detail of your contract is essential. To help customers understand the relationship, provide an agreement with transparent terms, payment deadlines, and overdue fees from the onset. If you do not get the customer to agree to late payment penalties upfront, you likely will be unable to enforce them.
Tip 2: Require a Deposit
It’s not unreasonable to agree to a deposit before starting a job. After all, why should the vendor take all the risk? If a project is significant, break it into phases, with payment due after each finished stage. It will rarely cost you the job requiring deposits, and if it does, you’ll likely have avoided a bad debt situation.
Tip 3: Invoice Quickly
Send an invoice once you’ve finished work, or the product is delivered. Promptly sending invoices is the best way to keep cash flow consistent, cover business expenses, and grow.
Tip 4: Set up a Retainer
For continuing projects, setting up a retainer arrangement where customers know what they’re paying on a regular basis means recurring billing so that payments are on time or early.
Tip 5: Provide an Early Payment Discount
The primary advantage of early payment discounts is that vendors can get paid sooner, accelerating cash flow. It also reduces the risk of nonpayment or late payment.
Tip 6: Automation is Key
Automation is key to saving time and money for you and your customers. Regarding invoicing, ensure your platform is cloud-based and set up for payment reminders, recurrent billing and online payment functionality. Allowing customers to pay online makes getting your money on time much easier and more likely.
Tip 7: Regular Payment Reminders
Payment reminders are essential in ensuring your customers prioritize paying you. Sending a kind reminder days before the due date reminds customers that the deadline is approaching. Follow up with a phone call if your payment terms have lapsed. Yes, a phone call isn’t the most comfortable thing, but it is much harder to ignore or overlook than eMail.
Tip 8: Provide Convenient Payment Options
Broadening your payment options provides convenience for your customers and fewer reasons to delay payment. Some customers want to pay by cheque, credit card or online payment system; others choose direct deposit via EFT. Inform yourself of the risks and benefits of each, but don’t limit yourself to relying on payment only by cheques.
I hope implementing these debt collection tips will help you get paid sooner. As every business model is different, I suggest trying various tactics to see which works best and modifying your approach based on the results. Be aware, continuously evolve, and never overlook your intuition. For those hard-to-collect aging accounts, submit them today.
