Not all customers are perfect, and over the lifetime of your business you may come across several who won’t pay their invoices on time. This can cause business owners to forgo hiring necessary staff and even paying themselves. Luckily, there are steps you can take to collect payments and prevent this from happening with customers in the future.
1. Send out reminders.
After sending out your invoice with a clearly printed due date, send a reminder as the deadline approaches to help you collect payments. Consider sending your reminders by email. You may have more luck with open rates since most people have mobile phones that provide easy access to their email.
You can use an email service to determine if the email address is undeliverable. This allows you to see whether or not the email address is valid.
Consider using an invoicing service that provides links and buttons within the email to make paying seamless and easy.
2. Offer different ways to pay.
Some customers make late payments because their payment options are limited. You can solve this issue by offering different ways for them to pay. Today's consumers are going increasingly digital, so it's important to provide ways for them to pay using digital platforms.
A great way to encourage your customers to pay on time and break the trend of late payments is to offer a discount for paying early with an automated payment system.
For example, enable your customers to pay via peer-to-peer payment apps. You can also facilitate payments through online payment systems that support traditional credit and debit cards. Ensure customers have at least three to four options.
Providing your customers with convenient payment methods can encourage them to make their payments on time. Send them a request to pay their invoice via a payment app.
3. Provide different notification options.
During the process of obtaining your customer's billing address for the invoice, get a cell phone number that can receive text messages and an email address they frequently use. Always ask for the customer's permission to opt in. Give them the option to set up notifications, including the frequency. You can also leverage a messaging chatbot that messages them about missed payments.
Notifications can tell customers when an upcoming payment is approaching or remind them about past due payments. You can have your customers elect for push notifications that pop up on their phones when their due date approaches.
However you choose to notify your customers, the important thing to remember is to give them the autonomy to control how many times this notification alerts them. You don't want them to become overwhelmed and begin to ignore the notice.
4. Think about your invoice’s design.
Consider where the due date is located on your invoice and the colors you use to draw attention to important deadlines or messages. Red is the typical color used on invoices when a payment is late. It draws attention to the due date or message you want your customer to see, especially when it is used against a white background.
As well, be sure your payment terms are outlined in the invoice. This includes clearly writing out any late fees or penalties for making late payments.
5. Consider discounts.
A great way to encourage your customers to pay on time and break the trend of late payments is to offer a discount for paying early with an automated payment system. Automated payments reduce the risk of the customer missing a payment and incurring any late fees. It can also help you save money in the long run.
Print the discount clearly on your invoices, post about the offer on social media or via text messaging and include a link within your emails to encourage customers to sign up for the service.
If all digital communications have failed, it's time to call the customer directly. Remember to be polite but assertive. Ensure that you are speaking to the customer and explain that the payment is late.
Listen to your customer and find out the cause behind the late payment. Consider working out a reasonable payment plan. For example, you can ask them to pay half the bill over the phone and the other half by the end of the month or within 15 days. During this call, inform them of the automatic payment option to prevent this from happening in the future.
With these tips, you can start encouraging customers to pay their invoices in a timely manner, collecting late payments and mitigating the same issues from happening going forward.
Rahul Varshneya is the co-founder of Arkenea, a custom software development company. He is also a member of Young Entrepreneur Council.
Read more articles on accounts receivable payable.
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