One of the difficulties of running your own business is getting the just rewards for work from your own customers. Often the problem is that some customers do not pay or if they do, they do not pay on time. The good news is all is not lost and there are strategies that can be employed to ensure prompt payment for the mutual benefit of both you and your customers. Here are ways to ensure you are paid on time.
- Set a clear agreement with your customers
The reason why some customers do not pay on time is that the terms are not clear to them. From the start, be sure that both you and your customer are clear on the terms of your agreement. In this way, not only will the customer know what his obligation is, but this will also avoid “surprises” in later transactions. You and your customer should agree on the following things: the rate of payment, the schedule for payment, the preferred payment method, the contact person to whom the invoice shall be sent and any applicable penalties or discount schemes.
If it is possible, with the nature of your transaction, to set a fixed periodical rate and a consistent schedule to demand payment, then do so. By having a fixed rate, it will be easier for the customers to make payments as they would not only know how much is expected of them periodically, but they will also not have to spend time reviewing the invoice sent to them since they already know it is the same every time. This will also allow you to perhaps set up an automatic invoice if you are using cloud-based software.
Ensure that this agreement is in writing so that in the worst case when your customer still will not comply with the terms, you can pursue legal remedies.
To know more about setting clear expectations with a new client, read this article from Forbes.
2. Upfront Payment Schemes
By asking for the payment upfront, you will not have to worry about not receiving payment on time. Unfortunately, not all customers are willing to part with their hard-earned money without knowing whether your services or products are satisfactory. In that case, you can adjust this with alternative payment schemes.
For instance, instead of asking for the full amount upfront, you can ask for a downpayment, perhaps around 50% of the rate and then you may both agree that the remaining 50% will be paid after completion of the project or delivery of your obligation. You may also engage in an installment scheme, wherein for N number of products or deliveries, you get to be paid a designated proportional amount.
3. Send invoices on time or even earlier
Usually, customers do not pay on time because they also do not receive invoices on time. This says a lot about how important punctuality is to you because if you yourself cannot practice it, it gives them a reason not make it a priority as well. Not only that but due consideration must also be given to our customer, especially if it is a business composed of many people, will make the payment. Some businesses have intricate systems which means that upon receipt of an invoice, some time must elapse before they can release the money for payment. This is why it is recommended that if possible, the invoice is sent a bit earlier to give the customer due time to comply with it.
4. Engage Cloud-based software
In line with the previous item, one of the best ways to make sure that your client receives invoices on time is to have them use cloud-based software. There are several cloud-based bookkeeping software that allows you to send invoices immediately.
You can even have it set so that it will be sent automatically especially if the rate is the same every month. The brilliant aspect of this strategy is that some software allows for payment options through third-party applications which means that as soon as the customer receives the invoice, payment can easily be made by simply clicking a link. You may also scan receipts and other documents and have it sent directly to them. By making payment less of a hassle for them, you make compliance more likely.
Capterra rounded up the best billing and invoicing software in the market. Read here.
5. Send the invoice to the right person and be polite with it
When dealing with a customer with multiple employees, it is crucial to find the right person to receive the invoice or else it may get lost in the hands of a person who does not know what to do with it or it may be lost due to bureaucracy. It is also important that in sending the invoice, the wording of the request be made politely. It also helps if the request would be framed to make it appear that you are primarily concerned for the benefit of the customer is asking for payment rather than you demanding for it.
6. Give Incentives for Early Payment and Penalties for Late Payment
People respond to reinforcements. By awarding punctual payment, you are able to reinforce this good behavior and ensure this behavior is repeated again. Some forms of incentives may include discounts. In the same way, your customer must know that late payments will not just be ignored. Late payments if met with a penalty will also make customers pay on time as they would want to avoid incurring additional liabilities.
7. Establish and Maintain Good Relationships with your Customers
Aside from other strategies focusing on making payments easier for the customer to comply, one way to encourage them to pay on time is by having good relationships with your customers. Customers, when made to feel like they are valued, would naturally want to return the kind treatment and pay on time. It is best if the pleasant nature of your relationship is established from the very start. This can be done in many ways from being generally warm to them in your meetings, addressing them by their names and perhaps sending little tokens of appreciation every now and then. For more tips on how to build killer relationships with clients, read this article from Entrepreneur.
These are just a few of the many things that can be done to ensure that your customers will pay on time. As long as you are able to provide satisfactory services and products and are able to make payment methods easier for your clients, then receiving payments would not be a problem.