Late payments from customers can cause serious cash flow problems at your business. If you you need customer cash for regular expenses like rent and payroll, late payments can lead to late payment fees, interest costs on borrowed money and anxiety among your staff. It also increases the risk of nonpayment if the delay becomes extended.
If you want your customer to pay on time, you have to do more than just ask nicely. These tactics have been proven to work:
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- Establish a late payment penalty where interest begins accruing on the day after the money is due. Make this part of your contracts and list it on your invoices.
- Offer discounts for companies that pay their invoices early.
- Charge upfront payments. Charging 10 to 20 percent before work commences gives you a cushion against future late payments.
- Negotiate when all else fails. If it's apparent the client can’t pay the full amount, it's better to get as much as you can on friendly terms, because lawsuits are always expensive.