Good cash flow is vital for any business, or they will not be able to pay their bills. When goods are sold and the invoice issued, you have a right to expect to receive payment within the specified time, but unfortunately, that does not always happen.
This can be a problem if it is a long established customer who purchases a lot from you. If they have always paid when they should and suddenly payments start coming in late beware, as it is often a sign of financial difficulties.
Start As You Mean To Go On
From the start of your business set a time limit for payments and make sure that it is clearly stated on your invoices and that your customers are aware of it. Sometimes, especially with larger companies, they have processes to go through that take time. Even so, they such do their best to adhere to your terms. Ask them if there is any way you can speed up their payments, perhaps by sending the invoice to s different department to the one that ordered the goods.
Use Friendly Reminders
Business owners are usually busy people and sometimes a payment is late because they have forgotten. A friendly reminder to jog their memory might do the trick, and your payment could then turn up quite quickly.
If the friendly reminder option does not work, you will have to be a bit firmer with them. If this still fails you might want to consider turning to someone that handles commercial debt collections. Although this course of action might lose you a customer, customers they do not pay are worse than not having them as a customer at all. They have your goods after all, and you just want your money.
Offer Settlement Discounts
Some businesses find that settlement discounts work very well. This means you offer a discount of say 3% if they pay in a shorter timescale than the norm. Over a year this can be quite a saving for them and from your point of view it is cheaper than using your overdraft.
Other businesses opt for the reverse and say that any invoices not paid on time will have interest added to them. This is not quite as effective as the settlement discounts as people just refuse to pay the extra.
If you decide to use either of these methods, it must be clearly stated on your invoice.
Makes Friends Of Your Customers
Get to know as many of your customers as you can. An occasional chat is all it takes for them to choose paying you over someone else if money is tight. With large organizations, chat to the people that make the payments, and the person that orders from you as then they will all be on your side when any money is due.
Make Sure There Are No Errors
You should ensure that your invoice is clear, concise and has no errors. Mistakes on an invoice are a common reason for payments being delayed and if this is the case, it is down to your business that the payment has not arrived when it should.
For your business to have a good cash flow, you need to be paid on time and getting clients to pay you when they should is what needs to be done.