Small businesses tend to be dependent on regular cash flow in order to keep things running smoothly, and if you’re a small business owner, you’ll know how frustrating late payments can be, especially if you’re relying on that payment. It’s inevitable that late payments will sometimes occur, so in today’s difficult market, it’s crucial that your business implements a strategy to successfully deal with them. Listed below are just some tips and tricks that will help you avoid and keep track of those annoying late payments.
Fill Gaps in Customer Data
Not having up-to-date and correct customer data is just one of the many reasons why late payments can occur. Ensuring that you have all your customers’ and clients’ details up to date, such as postal address, email address, and telephone number is essential in order to make quick contact with your customers when sending an invoice or chasing up a late payment. If you don’t have a way of keeping in contact with your customers, you will be unable to keep track of any late payments or contact your customers to understand why they’ve been unable to pay.
The sooner you send an invoice to your customer, the sooner you are likely to get paid for the product or service that they’ve purchased from you. Although sending an invoice to your customer straight away won’t necessarily make any difference to how you track the payment if it’s late, bear in mind that you’ll need to add this invoice to your records which will then give you a definite time and date when you requested the payment, meaning you can use this to determine how late the payment actually is. If you’re not sending invoices to your customers, now is the time to start – it’s simple to create a free invoice and it could be a move that is really beneficial to your business.
Make Expectations Clear
If your customers aren’t 100% sure when you expect them to make payment by, it could be really easy for them to make a late payment without even realizing it isn’t on time. For this reason, it’s important that you make it absolutely clear on your invoice when you’ll be expecting payment – for example within ten days of receiving the invoice. Some business owners and freelancers also find that including an incentive to pay as soon as possible often works, for example if the customer pays within five days of receiving the invoice, they’ll be awarded with a small discount or free gift. Having clear and definite expectations is essential to both avoiding and keeping track of late payments.
Don’t Be Lenient
Whether you are friends with or even related to a particular customer, never be lenient in your terms of payment, as this could end up with you being out of pocket. You should treat every customer equally no matter who they are, as doing special favors for family and friends can be harmful to your business, even if it is a nice gesture. Giving certain customers more time to pay can make it harder to track your payments especially if you don’t provide them with a clear deadline to make payment by, so it’s important to make sure that everybody abides by the same rules.
Keep in Touch
Just because a customer hasn’t made payment when it’s due, doesn’t mean that they’re not planning on paying it. Sometimes a customer will be unable to make a payment on time due to financial difficulty, but may have a plan in place for when and how they’re going to pay you. For this reason, it’s important that you communicate with your customers in order to find out when they’re planning to make the payment, which is essential to keeping track of the money you’re expecting to come in.
When it comes to making payments, some customers can be picky about the method that they use. Whilst some prefer to pay in cash, others will stick to using services such as PayPal. Because of this, offering customers a variety of options for paying will have an effect on the amount of late payments that you’re receiving. In terms of tracking your payments, it’s a good idea to ensure that all payments are made into the same account no matter which method is used. Make note of what’s expected to be paid into this account, when, and by who.
Are you a business owner who’s managed to successfully keep track of your late payments? We’d love to hear how you do it in the comments.