Cash flow is one of the most crucial aspect of any business. It is the payments that drive any business. Getting clients to pay up on time is one part of the challenge, while the other part is providing an effective mode for faster payments. All of this adds together to the pressure over payment cycle. One has to tackle unpaid and overdue invoices with care and ensure that the client relationship is not being jeopardised.
Here are some useful ways:
1) Send In Gentle Reminders
E-mail payment reminders are crucial for handling unpaid invoices. The message of the payment reminder must include the details of how much time has it been since the invoice became due, showing a sense of urgency. One should highlight the problems that one is facing because the particular payment has not been received. One can also set additional automatic reminders to ensure that the payments can start flowing in. Repeated messages builds gentle pressure on the client to pay up. With the use of an online invoicing software the task of payment reminders can be automated, saving you extra time and efforts.
2) Advance Payments
Many businesses have a policy of an upfront or an advance payment. This is a lump-sum amount or a percentage of the total cost of the project. Advance payments help in ensuring that Invoices never go into the overdue status. Managing advance payments is no more a hassle for businesses. You can easily manage credits and advance payments with credit management feature of online invoicing software in a single dashboard.
3) Stay Positive
Making the client feel that you are worried, is not the solution. Be confident about getting your payments. Make sure the client does not find a reason to delay the payments. Talk about how other clients are prompt at sending out payments on time.
4) Billing Statement
Sending out billing statements to clients ensures that they are looking at the status of invoices which are overdue. The statements must be attached along with a reminder mail focusing on invoices which have not been paid.
5) Follow Up Over a Call
Having good relations with a client, ensures that one can give them a call and have a chat about the reason behind delayed payments. This will help in ensuring that the client remembers that the payment has to be made on priority. One can also figure out if the reason behind delayed payments is actually genuine or requires more action.
6) Know The Right Time To Escalate
It is important to understand a client better, while sending out payment reminders and following up. Each client has a different temperament and a different time schedule for making payments. There are clients who agree to pay after 30 days but ensure that the payment is made after 45 days. When you know this for a fact, then a single reminder on the 40th day is all you need. Putting unnecessary pressure on some clients can spoil the relationship and cause the payments to get delayed even further. On the other hand if a client is consistently making late payments, then a more rigorous follow up strategy must be devised.
7) Deploy a Staff Member
Payment follow ups and reminders must be delegated to dedicated resources. As a business owner one should not waste time and energy in the initial round of payment follow ups. These must be handled by the respective sales and account managers.
8) Charge Interest on Overdue Invoices
Charging interest on invoices that have become due is a legal process of getting compensated for late payments. Charging an interest is purely based on the kind of relationship you have with the client. One should communicate about the late fee or the chargeable interest from the very start. This makes the client psychologically prepared about the charge and ensure that the payments are being made on time.
9) Financial Analysis
A detailed financial analysis of outstanding and invoice ageing reports can give you a fair idea of the clients which are constantly paying late. One can warn such clients in a timely manner and ensure that they are on track.
With this in mind:
When you keep selling to the late payer’s, it might end up risking your business lose more cash. Therefore for any small business owner, set the process of sending invoices and payment reminders automatically. This helps to maintain the record of every customer’s overdue details. Yet, when you have a clear-cut strategy to handle such invoices then the problem does not seem that big.
However, preventive measures like using an online invoicing solution like Invoicera are helpful in sending out professional invoices to clients and getting paid quicker. With a convenient invoicing, one can assure of getting timely alerts !