If you are not paid or do not get paid promptly for your products or services, you cannot expect your business to last very long. Here are ways to minimize losses and overdue accounts, and helps make sure that your business gets paid:
Welcome the sale, but watch for tell-tale signs
- If you are dealing with credit card phone orders, call for verification of account number, expiration date, and credit balances. Make sure the name of the person ordering is the same as the ship-to-name and the merchandise is addressed to a street address, and not a box number.
- If this is a service engagement, do a quick look up on the Web about the client, particularly any mentions about payment. Go to the website, if any, and verify the contact information provided. If this is a business, check out Better Business Bureau or Dun and Bradstreet (if you’re willing to shell out some money) and read the reviews about the company.
- Be aware of signs on online credit card fraud
Try to get payment up front
- For new accounts, attempt to get credit references or prepayment, possibly by offering a discount or free shipping
- If you wish to take a chance, limit the amount of the credit on the first few orders.
- Require a down payment (industry standard is 30%) before the project begins. Make it clear to the client in your initial discussions as well as in the contract.
- Use the contract to get the confirmation of the customer about payment schedules including the exact amounts, dates and other milestones. Also specify the type of currency acceptable (if dealing with foreign clients) as well as who will shoulder the transaction expenses. The clearer your contract is, the easier it will be for you.
Give incentives for early payment
- Offer a discount for paying ahead of time. If your standard payment terms is 50% down and 50% after the service has been done, offer to lower your price anywhere from 10-20% if the customer agrees to pay 100%. Or if they preorder your services for the next month or so.
Be prompt in issuing payment reminders
- Send an invoice on the same day. If you closed the sale today and the goods are already on their way, or even if you did part of the services required, do not let the day pass by without sending your client the invoice.
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Make it easy for clients to pay you
- Offer as many payment options as you can
- Accept credit card payments. If you don’t have a merchant account, check out services such as Paypal or Square
- Make sure that your invoice has all the information a client needs to pay – from your name, address, project name, payment amounts, tax information, reference or purchase order number (if any), etc.
- Make your invoice clear and easy to understand. Make sure that your invoice does not contain any terms unclear to the customer. If the customer wants certain information on their invoice to make it easy for them to understand what is expected of them, accommodate their request.
- Always have a standard payment form with you, especially if you are not expecting a sale.
- Sign up for services that allows you to accept credit cards such as Square, so even if you are working or selling on location, you can still accept credit card payments
Set up procedures for collecting payment
- If payment is late follow a normal collection procedure. Send a reminder letter as early as 30-days past due on an account.
- Follow-up with courteous phone calls two weeks apart. Pin down a commitment: When will the check arrive and for how much? If promises are continually made and not kept, turn the account over to a collection agency.
- Treat customers with diplomacy and respect. This is especially true when times are tough and customers are struggling to pay their bills http://www.powerhomebiz.com/financing-a-business/cash-flow/collecting-past-due-debt-existing-customers-lawncare-landscaping-industry.htm
- If the customer requests for an extension due to financial hardships, consider the merits of working with the client.
Hire a collection agency
- Find a collection agency that values customer service and will treat your customers with respect
- Compare the rates; and if possible, find one that will charge less fees and let you keep a bigger share of the money collected
Category: Cash Flow