According to credit data experts CreditorWatch, payment times are presently 157 per cent higher, on average, than October 2019. Which means it’s essential for all businesses to be vigilant when it comes to managing accounts receivable.
A faster working capital cycle delivers more secure cash flow, helping to support the success of your business. Prompt collection of payments is also critical to maintaining a healthy supply of working capital.
Here are eight steps you can take to help ensure you’ll get paid on time.
When you establish the relationship with your customer:
1. Run credit checks. When you work with a new customer, running a credit check gives you a picture of their financial history and lets you know whether they're likely to pay you on time consistently.
2. Set clear payment terms. If you haven’t already, set up payment terms with your customers by working together to come up with an arrangement that benefits both parties.
3. Offer convenient payment options. Being flexible and letting your customers choose the payment method that suits them reduces any frictions they could face paying you.
When you have delivered your service:
4. Use progress billing. If you're working on a project with multiple stages over a period of time, progress billing lets you invoice your customer after defined stages. Using progress billing means late payment issues are flagged before you've delivered everything, potentially making them easier to resolve.
5. Invoice promptly. Accounting software such as Intuit QuickBooks can automate sending invoices, send reminders and track payments and overdue accounts in one place. Many customers are often very busy and will simply forget to pay on time. You may find they appreciate reminders sent through cloud-based systems such as these.
6. Offer payment plans for overdue debt. If your customer is struggling to pay the invoice in full, offering a payment plan can be a win for both sides. It helps them manage what they owe you and gives you a better chance of being paid in full.
7. Consider prompt payment incentives. Offering incentives, like credit to put towards a future purchase, gives your customers a compelling reason to pay you on time. Offering additional purchasing incentives throughout the year — for instance to celebrate business anniversaries and holidays — is another way to help build repeat business.
8. Work on customer relations. By building stronger ties with your customers, they may be more likely to pay on time. Easy ways to build rapport with current clients include instituting systems to collect customer feedback and providing a method for customers to get in touch with any concerns. Customer management software such as Monday can help you capture important data to help shape your conversations with clients.
Late payments can really start to affect a business’s cash flow if they are not properly managed. So follow these steps to give your enterprise the best possible opportunity to maintain a health flow of cash through the business at all times.