Put an end to delinquent accounts

Do you have customers who are slow to pay? Don’t worry; you’re not alone. In fact, 50% of small businesses struggle with late payers. Customers taking their sweet time to pay is something small businesses have been allowing for far too long. Put your foot down today and take these proven precautions to help prevent those late paying customers.


Here’s how you can stop those late payments and start improving your cash flow:

  1. Make informed decisions. Yes, believe it or not, you do have yourself to blame for some of these delinquent accounts. A few of these customers should have never been offered net terms to begin with. That’s why you have to be smart when it comes to extending credit. Have a credit application process where customers provide you with information that allows you to learn about their financial past. For example, ask for trade references. If you want to know how likely they are to pay you, just ask someone else who has extended them credit before. Also, pull credit reports on your customers. This will give you a detailed explanation of their payment behavior and help you spot any financial trouble they may be in. If you are truly uncertain of how likely a customer is to pay, don’t hesitate to operate on C-O-D (cash-on-delivery) terms with them. Give yourself a chance to get to know them and build a relationship, then you can begin extending net terms.
  2. Choose your words wisely. When you invoice a client, make sure they understand exactly what is going on. Your invoices need to be clear and concise. Don’t just tell customers they have “3 weeks until payment is due” but provide the exact date. Also, don’t use a ton of frivolous language throughout the invoice. You don’t want your customers to get caught up in reading nonsense and forget to take note of the important details. Use the invoice to your advantage and include any late payment consequences or early payment rewards you might have. Make sure you are providing some extra motivation for your customer to send that check in on time.
  3. Foster the relationship. It’s important to never overlook the human element of receivables. And by that I mean: sometimes people just forget. We all lead busy lives; it’s almost too easy at times to push things aside. Therefore, you have to take action and make sure your customers DON’T FORGET. Do them a favor and help them remember. It’s crucial you keep up communication with your customers. Always keep conversations going with your customers. Be active with them on social networks such as Twitter, Facebook and LinkedIn. Send them thoughtful, quick emails checking in on their families and business. These kind gestures go a long way in building a successful business relationship and also help keep you on your customers’ minds. If you’re always popping in, it will be hard to forget when they have something to send to you. Also, if it is a week before payment is due and you still haven’t received payment, send them a nice, friendly reminder letter. No need to be pushy but simply reiterate their due date, along with the rewards and consequences.
  4. Provide options. If you really want to get paid faster, make sure you embrace all the conveniences available today. For example, you really should offer your customers a way to pay online. They should be able to use their credit card or direct debit. Not only is this more convenient for the customers, as they can literally take care of the payment the moment they receive the invoice, but it also means you don’t have to spend time waiting for the check in the mail. Also, be willing to work with customers who have hit a financial hard spot. Installment plans are an excellent way to help out this customer and help you get paid. Work with the customer to see what kind of payment plan they’d be able to work with that also helps take care of your cash flow needs. This gesture will be one your customers won’t forget and is a great way to increase customer loyalty.

Are delinquent accounts a problem at your business? How do you get your delinquent accounts to pay up?

 

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About the Author

This post was written by Meredith Wood, Community Manager at Funding Gates, the first ever online credit department for small businesses. By automating the entire debt collection process, Funding Gates serves as the one-stop-shop for receivables management. Always looking for good talk on small business, connect with Meredith on Twitter @FundingGates.

 

 

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