5 Useful Tips to ensure Prompt Payment from Customers

Written by admin on April 25th, 2011

A healthy business will always have a timely turnaround of accounts and a steady cash flow. The accounts receivable area of any company is arguably the hub of the ongoing operations. Getting customers to pay on time may not always go as smoothly as you would expect. There are various techniques available to ensure prompt payment from customers. When all else fails, a debt collectioncompany can be extremely useful for chasing old debts.

If you are struggling to get monthly invoices paid, try these useful tips to encourage prompt payments of accounts for the continued growth of your business.

Screen potential clients; know your existing customers

Before you set up a credit account for anyone it is imperative to screen the potential client. Verify the address and other contact details are current. It is also good practice to check these details with existing customers each time you draw a new invoice for them as this helps to prevent correspondence being sent out to the wrong address. Many debt collection agencies offer credit enquiries and analysis to assist you in this regard and identify any ‘red flags’ that may be present.

State the trading terms clearly on invoices

Having the trading terms stated on invoices gives you a referral point if at any time the account is not paid within the agreed terms. This should form part of your initial agreement when offering credit to a new customer as part of your terms and conditions.

Offer early payment discounts as an incentive; late payment fees for overdue

Offering discounts for early payment can be an incentive for prompt payments. Even a small reduction of 2% can encourage customers to pay before the due date.

On the other hand, penalizing a customer for late payment can also assist in ensuring prompt payment. However, before applying any late payment fee for overdue accounts ensure this has been advised at an earlier date in the terms and conditions.

Send regular accounts and follow up statements for monthly clients

Invoices need to be sent out as soon as the sale or service has been completed. For monthly account holders,follow up on unpaid invoices with statements clearly showing the details of each invoice, the date of the transaction and amount outstanding. Highlight the fact that it the account is overdue.

Keep in contact by telephone

Keeping contact by telephone even with regular customers will mean you always have their current details on file. Updating your records on a regular basis will make the debt recoveryprocess easier and you may find you have better success rates.

Refer the debt to a Debt Collection Agency

Using a debt collection agency for delinquent accounts will also ensure prompt payment and therefore assist in maintaining a healthy cash flow.

Debt collectors are experts at recovery and will ensure payments are made promptly. Most agencies work on a ‘no collection no fee’ basis and therefore, there is no downside. Further, it allows you to focus on core business and not waste time chasing debtors.

In conclusion

Allowing customer debt to build up is bad for cash flow and hence your business. While the assets side of the ledger might seem healthy, if any of those debts have to be written off at the end of the year as an expense your profit is going to suffer. Getting customers to pay promptly can be less of a challenge if your procedures for collecting debt are consistent.


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