Chances are you've started a business and searching for solutions on how to respond to late payment.
Chances are you've started a business and searching for solutions on how to respond to late payment. You're not the first or only! You have definite options. Here, we give you three ways to stop late customer payments...
How To Make Late Customer Payments A Thing Of The Past
Waiting for customer payments has to be one of the most frustrating parts of running a business. It might be you've done all the hard work, the service you've provided is complete, yet you still aren't seeing any money.
In some instances, this can all be innocent as the client may have run into some unexpected money issues. Perhaps a family member had a bad accident and they've had to pay for an operation? In which case, they're prioritizing that over paying you.
Situations like this need empathy, and you can actually earn some repeat business if you're sympathetic. However, there are far more cases where customers are just dragging out the payments for as long as possible. It could be:
- Laziness
- Bad records keeping
- Never had the funds
- They need an assistant to handle the workload
Who knows? From your perspective you've completed a job and your client is delaying payment.
How to collect money from clients who won't pay?
Thankfully, this can be stopped by implementing a few guidelines. You should start by reviewing your business policies and if they could be unclear. Or perhaps you've made a few of the mistakes discussed in this article.
Here are three reasonable tips to avoid late customer payments...
Outline Payment Terms
Did you accept a job without making the customer sign a contract outlining the terms of service? Tsk, tsk! Small businesses do this far too often. Or they get clients to sign a contract without including any payment terms.
You need to stipulate when you expect payment following a job - this could be before the job, immediately after it's completed, or within a set timeframe following completion. If none of this is in writing, your clients can take as long as they like without grounds for legal repercussions.
If at all possible, implement online payment options.
Send Your Invoice ... On Time
Believe it or not, some business owners don't even send invoices. ? They rely on goodwill and overdue payment reminder email alone - which rarely works.
You need to create and send formal invoices as soon as the jobs is done, or as scheduled, according to your service agreement. There are a lot of good invoice processing software options available now, so there's no excuse for not sending.
The beauty of an invoice is that you have proof of asking for payments, and it can also include payment terms, reminding and incentivizing the client to pay on time.
Take A Deposit
Deposits can be used in a couple of ways:
- To encourage the client to pay
- As a test
You can ask for a sizable deposit. Choose between:
- The client is to be paid back when they pay you in full for the entire job.
- The deposit is applied to the customer's total balance if paid by a certain date.
The options encourage them to pay quickly, or they'll be without funds.
Similarly, if a client can't afford to pay a deposit for your service, it's a good indicator that they might not have the money to afford the services you will provide. By requesting a deposit from customers, it creates a mutual trust.
Final Thoughts On Halting Late Customer Payments
Dealing with late-paying clients is always a challenge. First, don't make the above mistakes when dealing with late paying customers.
Instead, create a system where deposits are taken, invoices are sent out, and payment terms are set. The coronavirus pandemic made payment options more user-friendly. If possible, implement ways to accept payments online.
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