Dealing with customers who don’t pay on time is a major headache for business owners. It is stressful and can have an adverse effect on business health since late payments are a major factor in cash flow slowdowns. As good cash flow and good customer relationships are two of the mainstays of small business success, this situation really can feel like a conundrum, especially for first-time business owners who are still learning the ropes, according to ZenBusiness. New entrepreneurs can benefit from learning simple strategies for making sure you get those payments when they are due – but without jeopardizing the relationships you are building with your customers.
Shift the way you think about customer relationships.
If you’re thinking about customer relationships as the problem in this equation, this might be a large source of the stress you’re experiencing. Because tapping into the relationship of trust and loyalty you have created with your clients is the first step in securing prompt payments. The more your customer values their business relationship with you, the more they are invested in maintaining it, the more likely they will be to pay on time. In addition, if you already have open lines of communication with clients, it will be easier for you to send them gentle reminders to pay on time.
Offer incentives for early or timely payments.
Attaching penalties for late payments can be a good idea, both because it encourages prompt payment and because it can offset income loss due to debts that remain outstanding. But balance the threat factor of penalties with the reward factor of discounts and incentives for customers who get their payments in as soon as possible. Incentives could be in the form of lower payments or percentages off, but you could also set up a points system, or give them access to free services when they have paid on time consistently. Emphasizing incentives instead of penalties keeps the focus on the positive, and the relationship on a good footing.
Make it easy to pay.
Some customers may hold off on paying you deliberately. Others, however, may simply have forgotten. Still, others may mean to pay and have every intention of doing so, but keep getting put off if the payment process is not easy. So first, make sure your payment reminders aren’t slipping through the cracks. Be sure you have the correct contact information and are sending invoices out to the correct person or department. Make it easy to pay by setting up automated options, Bundle multiple payments into one, when possible, especially if customers are paying by mail, so they don’t resent the expense on checks and postage. And make your invoices easy to read, so they aren’t frustrated trying to decipher what you’ve sent them.
The cumulative benefits of getting timely payments.
Getting your customers to pay on time will make a big difference for all your operations. When you are stuck waiting for payments, you may not have immediate access to the cash you need for routine expenses such as payroll, rent, and utilities. Or, even if you have these basics covered, you may end up putting off making important purchases or repairs that could benefit your business. And the anxiety associated with waiting on delayed payments is bad for workplace morale. In addition, it’s difficult to make good financial forecasts or projections if you aren’t clear on how much cash is coming in – and when to expect it.
Getting customers to pay on time, and happily, will make a significant difference for your business profitability as well as its overall health. And it really isn’t a daunting task. As long as you are approaching this with the right mindset, and with a few basic principles to put into practice, you should easily be able to ensure regular and prompt payments without loss of loyalty. Small business owners in the northwest Ohio area looking for an added boost for their business, check out the services offered by Guy In the 419.
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