It’s a common problem where clients fail to pay on time, but it doesn’t have to be that way. This problem ranges from mild, where clients get late by just a few days, to serious situations, where they take weeks and even months just to clear up an invoice. The problem of late paying clients is usually very frustrating and can have serious to adverse consequences on your business and overall turnaround, and this is more so for the small and medium-sized enterprises.
The issues and reasons that contribute to client lateness in paying up are varied. They span from the inability of the client to pay, all the way to pure ignorance and a deliberate failure to own up. As a manager or business owner, the scope of measures that you can take to get your clients to pay on time will greatly depend on what’s keeping them from doing so.
For those who are unable to pay, either due to financial constrains or plain unsound business practices, there is really not much that you can do about it other than seek legal means. However, there is a secret to dealing with such people and it is a really simple yet effective little measure. Before extending any credit to anyone, just perform credit checks on them to find out who has good credit records and who doesn’t. Those with a bad record will most likely give you a hard time when it comes to paying.
As for those who may have other reasons for not paying on time other than financial constrains, there are ways with which you can turn around their paying habits to your benefit. As frustrating as the problem of late payments can be, you can rest easy in the knowledge that it is a problem that can be managed, and in the simplest of ways. All you need is to know a few tricks that are very valuable at getting clients to pay you on time. These include:
1. Enticing your clients to pay early
It has been said for a long time now that one good deed deserves another. The truth about this age old statement cannot be understated because it works very well in getting the client to pay on time. The secret here is basically to offer something good to the client who pays on time, which itself is in fact a good thing. The goodies that you can promise to give the clients who pay on time or before time can be in the form of discounts on the invoice or any other freebies that you can afford.
Make sure that the incentives are obvious and clearly stated on the invoices so that no client misses this important information. Also make sure that you own up to the promises you give when they comply, so you better give discounts or goodies that you can comfortably afford. It is a proven concept that such offers make clients pay on time, and the opposite, where you charge an interest for late payments, works as well.
2. Having lots of channels for payment
Many a times, the late to pay clients can want to hide behind reasons such as, ‘we didn’t make the payment because we like to pay through bank transfers and you wanted cash’, or something of the sought. Their reasons could be genuine or a clever ploy to keep from paying you. The secret here is to make sure they can’t have such reasons by making it easy for them to pay you through a variety of channels.
Today there are so many ways through which payments are made. It can be done through direct bank transfers, electronic funds transfers, mobile payments platforms, online payment options, debit and credit cards, the good old checks, cash and so on. Provide your clients with all these options and they won’t have a reason not to pay on time.
3. Following up swiftly on late payments
The moment a payment becomes overdue, ask the client about it. Don’t be scared to call or email the client and courteously ask what happened. You could even use software that automatically sends out reminders to the clients when the due date is close and notifies them when they fail to pay on time.
When a client fails to pay on time and you don’t say anything about it, it can very quickly become a habit. Such a client will take it that you don’t mind late payments and the duration of lateness will only increase with each new invoice. The secret is to nip the problem right at the bud before it takes root. Don’t hesitate to follow up on a late payment even if it was just a small invoice and be civil about it.
4. Invoicing early, invoicing well
Prepare and send out invoices as soon as work is completed or goods are delivered. It is imperative that you inform the client what they owe as soon as the work is completed, lest they forget that they do. If you take too long to invoice, the clients might take the cue from you and follow suit.
Here, you want to make sure that you invoice early enough, and do so with well detailed invoices. Many people don’t like the idea of paying for what they are unsure of. An invoice that is vague and doesn’t really explain exactly what is being paid for can make the client ignore it until it is made clear. Leave nothing to chance, and give your clients detailed invoices and in a language that they can understand easily.
5. Getting to know who signs the checks
This is quite a nifty practice and a secret that few really understand its impact on payment turnarounds. You might know your clients and the contact person whom you deal with, but do you know who actually writes the checks or approves the payments? Get to know who that person is and take their number. This is the person to talk to when payments are due or overdue.
Make an effort to establish a good relationship with this person because he or she is responsible for managing and scheduling payments. The company that you are dealing with could be dealing with a number of other companies at the same time. How they decide who to pay first could largely be swayed by the good personal relations you have with the person who actually pays.
It is easy to cultivate a culture of promptness in paying among your clients as you can see above. Your business depends on your clients and how they pay you should be in your control. Put in place systems that employ these simple tricks and you will have little or no problem with late paying clients.
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