How to get your clients to pay you on time
There is nothing more frustrating to a business owner than
delivering quality products and services on time, only to have
to deal with a customer that pays late. Slow and late paying
clients can drain your resources and be a major source of
frustration. Many slow paying customers seem to require multiple
collection calls, reminders and cajoling in order to finally
pay. At their worst, slow paying customers can create
significant problems, especially if cash flow is tight.
When cash is tight, many owners tend to go into "collections"
mode. They will try every conceivable way to get late paying
customers to pony up. This is an understandable knee jerk
reaction to a tough problem. Unfortunately, it seldom works.
Late customers will keep paying late. And good paying customers
will get upset by the collections tactics. This ends up being a
lose-lose situation for all involved.
However, there is a better way to handle this situation, and it
is a way that produces good results in relatively little time.
All you need to do is to manage your clients and invoices as
will be suggested in this article. Once you implement these
techniques, you can stop worrying about your slow paying
customers and start focusing on doing what you like most:
running your company.
There are two things that you can do to ensure that you'll get
paid on time. First, you need to check out the credit rating of
your commercial prospects, before doing business with them. This
is very critical and easily done if the prospect is a business
(rather than a consumer). Second, you need to implement a
program to follow up on your invoices, but, using the right way.
If you do these two things, you will minimize the time and
frustration of chasing slow payers and maximize the time you
spend growing your business.
So, how do you check your business prospect's credit?
Remember this important rule. The best way to avoid having a
client that pays late (or worse, one that never pays) is to not
take them as a client in the first place. It really is that
simple! You can accomplish this by screening their business
credit rating before doing business with them. The most common
way to do this is to get a commercial credit report from one of
the major credit bureaus (Experian, Dun & Bradstreet, etc.).
Most business reports show detailed client information including
payment trends and a business credit score. The payment trends
are important because they show how quickly the prospective
client is paying his other vendors - a good indicator of how
quickly he will pay you. Commercial credit reports are valuable
tools that should be used to screen all potential business
clients. You will find that the small investment in time and
dollars will save you lots of hassles and potential losses.
The smart way to manage your invoices
Managing your invoices correctly is critical if you want to get
paid on time. This is necessary, even if your customers are
"good". Fortunately, it doesn't need to be complicated or time
consuming. You just have to do it consistently. The first thing
you need to do is to keep track of your invoice aging. Most
accounting packages such as QuickBooks