Cartwheels, bear hugs, freshly baked cookies — you’d go to the ends of the earth to keep your customers happy. Yet despite that exuberance, you’re somehow still getting paid ages after the due date. Thankfully, there are many ways you can flip this situation around. The five strategies below will encourage your customers to pay you on the dot, all while still keeping your relationships stronger than ever.
1. Shorten the cycle
Nets are not just for dunking. In the payment world, a net is another word for the full amount that is owed to someone. Many customers insist on net 30-, 45-, or even 60-day payment terms, which can be too long for many business owners to accept. Condense the timeframe by requiring payment right after a project is completed — not months later. To hedge your bets, you may want to consider requiring a deposit and payment right when you kick off a project.
Another way to shrink the cycle is by adding project milestones, with billing linked to specific deliverables. As each item is finished, another invoice can be fired off. This drips money directly back into your company, and makes heftier bills more palatable. As a result, your customers are more likely to pay you throughout the span of the project.
2. Automate reminders
Owners are responsible for every last detail of their business. At times, even though invoices get earmarked for payment, they can still slip to the bottom of the to-do pile. Automated reminders may be the cure. They act as a gentle nudge that will help your chronic late-payers remember to write you a check or initiate a bank transfer.
One way to do this is through a CRM (customer relationship management) system, which can automate certain emails and reminders. Many CRM options integrate with Gmail and MailChimp, while others have email reminder messages you can send out whenever the moment feels right. Boomerang is another free tool to check out for scheduling follow-up emails.
3. Keep up your relationships
A good working relationship with your customers is a must. It builds mutual trust and respect, and it also makes it a lot more fun to work with them. When that connection is in place, clients will also end up paying you more promptly. Since they value the relationship, they’ll know that timely payments will help enhance it even more.
4. Offer incentives
If you really need to keep your cash flow flowing, consider offering a discount for early payment. This is just like the early-bird discounts venues give out to people who register for a conference before a certain date.
An early or on-time payment discount helps you keep your books accurate, and compels people to stop their outstanding invoices from lingering. Offer an amount that’s generous but still makes sense for you, such as 10 or 15 percent. Be sure to clearly print the promotion on the invoice with the discounted total in bold. You may be surprised at how quickly you get paid after adding a simple incentive.
5. Accept newer payment methods
Expanding the list of payment methods is another way to encourage your clients to pay you more quickly. Checks are becoming a thing of the past, and credit cards are becoming a must for all businesses. In addition to credit cards, consider accepting PayPal payments, direct bank transfers, e-checks, and other methods that make sending money easy and safe.
Consider invoice factoring
If you rely on invoices but face cash flow issues, invoice factoring can be one way to fill in the gaps. In this scenario, a factoring company loans you money based on an outstanding invoice you have. These companies can be relatively pricey in terms of APR, which is why factoring is best used only if you have severe short-term cash issues.
Get all payment terms in writing
Although it’s tempting to do business with a nod and a handshake, it’s important for you to also get your payment terms in writing. Hammer out the details of how you’ll be paid, when you’ll be paid, and even who the checks should be made out to before you begin any job. You don’t want your customers to be on the brink of paying you, and then have to go dig up information about how to actually do it. In the (hopefully) unlikely event that you must bring up a disagreement or issue, you can quickly point to your contract’s payment clause to help clear things up.
Chasing after late payments is no fun. It’s awkward, unproductive, and doesn’t make you feel good at the end of the day. But with these small tweaks, you’ll be able to put an end to all that back and forth. Getting paid will be a breeze, and you’ll be able to spend your time on the important stuff: providing your customers with the love and service they deserve.