One key component of small business success is cash flow - getting payments from your customers so that you have the money to pay your suppliers (and, hopefully, earn some profit for yourself). Of course, that's easier said than done. There are many things that can interfere with this pipeline, from impatient suppliers to unexpected disasters.
An element of that pipeline that you can positively influence, though, is customer payments. A prompt payment from your customer gets cash flowing in much faster, enabling you to improve your cash flow and keep your business humming right along.
Through various simple techniques and incentives, you can increase the speed through which you receive payments from your customers. Here are some techniques for doing just that.
Send out electronic bills and invoices. When you acquire a new customer, record their email address. Then, when you issue a bill to them, send them a copy of that bill via email. This will do nothing but increase the speed of response at virtually no cost to you other than the few seconds it takes to send out the email.
Reward early payments. On the bill, allow the customer to pay a lower total amount if the payment is submitted by a certain date in the very near future. Allow them only a week or so to submit this lower payment. How much should you knock off? 10 percent is a good number to start with, but play around with it and see what works for you.
Make payments easier. Always include a self-addressed envelope with your bill, perhaps even with a stamp affixed to it. By reducing the resistance and effort a customer has to making a payment, the more quickly you're likely to receive payment. For me, at least, some bills are delayed simply because I don't have a stamp or an envelope handy.
Be willing and able to create a bill at the time of the service. Many businesses provide a service and then simply say "We'll bill you later." Quite often, though, the customer will pay immediately if you can come up with a bill immediately. Take blank copies of your billing materials with you if you're out and about and know how to calculate a
total bill so you can get the payment immediately.
Make your bills more clear. Highlight very clearly the total amount owed by the customer, when it is due, and where to send it. Quite often, invoices from small businesses do not adequately highlight these features. Put all of this information above the fold on the first page sent to the customer and you reduce the time and effort the customer has to put into interpreting the bill, figuring out where to send it, and seeing how much they owe.
To put it simply, you'll find more success in getting prompt payments from your customers if you minimize the barriers they have to payment. Make it easy for them - and even reward them for being prompt - and you'll see a quick uptick in the speed of payments from your customers.