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7 Ways To Prompt Your Clients To Pay On Time
Cash flow is paramount to your business' survival. Learn actions you can take to make customers pay invoices on time in this article.
Growing businesses are bound to encounter uncooperative customers at some point. Some will either pay late or not at all. Worse, they may avoid your efforts to reach them for their payments.
Cash is the lifeline of any business. Hence, maintaining a healthy cash flow is paramount. Non-paying customers can threaten your business and cause severe cash flow crunches when not dealt with immediately.
Fortunately, you don't need to stand idly in hopes that they'll get back to you one day. Here are some steps you can take if your clients are not paying on time.
7 Actionable Tips To Ensure Your Customers Pay Their Invoices
It is essential to be proactive when dealing with uncooperative customers lest they wreak havoc on your cash flow. Below are the actions you can take when you have a customer not paying an invoice.
1. Start every project with a contract
A common invoice mistake that small businesses make is failing to clarify payment terms. A project contract avoids confusion and sets the client's expectations.
Suppose you aren't sure how to create your contract. Here are some payment terms you can start outlining:
- At what point will fees be considered "late"
- How much you will charge for late fees, including possible interest rates
- A clause that states you may suspend work on their project if they incur late payments over a certain period
The contract must be signed before you work on the project. It acts as a legally binding document should you decide to take legal action.
2. Send out friendly reminders
You should keep up your efforts to contact non-paying customers even if they dodge your calls or ignore your messages. Reach out daily until they settle their outstanding invoice.
Yes, it can be frustrating to have clients not paying on time. However, try to maintain professionalism in your reminders. They don’t have to sound aggressive. Mention that the earlier they settle their balance, the earlier the both of you can move on from this and focus on other priorities.
3. Get a down payment upfront for larger sums
A project with a higher price means it will take much more time and effort to complete. The risk is also greater since most of your resources are on the line. Asking for a down payment upfront for large projects makes for good business sense, since it acts as a security that benefits both parties.
An upfront payment, whether partial or full, ensures that you will be paid for any services delivered so far. It also shows the client has the means to pay you.
4. Stop working on the project
Another way you can make clients pay is by suspending work on their ongoing projects until they settle the bill. However, ensure there's a clause in your contract allowing you to suspend work on projects with late fees before doing this. If there isn't, you may breach your contract.
5. Swing by their office
You may need to find alternative contact methods if your calls and messages aren't doing the trick.
Initiate a phone call with the company and try finding the contact details of the company via search engines or social media like LinkedIn or Facebook. You should also make a visit at their office and attempt to make a settlement arrangement in person. Meeting them face-to-face gives you the chance to negotiate and potentially settle the payment once and for all.
6. Extend an olive branch by setting up a payment plan
One possible reason they haven't paid you yet is because they can't afford to.
In that case, you can negotiate a payment plan that works for both of you. It can make the payment much easier for them this way. Negotiate how much they'll pay you and how often — once every two weeks or once a month, depending on your agreed terms.
Creating a payment plan helps you get paid faster and smarter since you won't need to wait until they have the full amount before remitting payments to you.
7. Seek legal action
Legal action is infamously tedious and time-consuming, not to mention a hassle for both parties. However, as a last resort, you can speak to a lawyer about what legal actions you can take if the uncooperative client doesn't seem to budge.
Then again, you may not have to go through the complete legal process. A letter of intent saying that you plan on taking legal action against your client can compel them to settle their outstanding balance quickly.
Avoid Cashflow Problems With The Help Of Finance Automation
It's easy to get stuck in a cycle of manual finance processes. But with finance automation software, you can cut through the clutter and get real-time data on your transactions, streamline processes, and avoid cashflow problems in an instant.
Automate your accounts payable processes with Spenmo, a cloud-based software that tracks and manages corporate payables including employee spending, corporate cards, bill payments, and reconciliation in one dashboard. Schedule a demo to learn more.