How can you avoid customer late payments in a high inflation environment
Late payments may be a major source of frustration for any business owner, regardless of whether they provide goods or services.
Payment delays can have a direct impact on a small business's cash flow, revenue figures, and payroll delays.
Late payments harm small firms, making cash flow management more difficult. Unlike large corporations, SMEs find it difficult to endure the cost of late payments and must thus adopt precautionary measures to remove the barrier to late payments.
Late payment can be one of the most detrimental issues an entrepreneur can face, especially if the business relies on cash flow to function.
Late payments mean you are not receiving funds when you need them. SMEs will have to rely on credit or borrow another loan to keep the company afloat while waiting for their customers to pay up.
Business owners' ability to collect payments owed by their customers on time will significantly contribute to your business's smooth running.
The steps below will help SMEs regain control of their cash flow and prevent unmanageable accounts.
Set payment terms at the start
While some organizations can collect payment as soon as the product or service is delivered, others may profit from establishing terms from the start.
If you're selling a subscription-based product or service, you can demand clients to pay before receiving the first delivery.
As a business, you must ensure that your payment policy is understood by your customers.
Include a clear and conspicuous credit policy on your bills or invoices, outlining payment conditions (payment due in 30 days or 45 days) and late payment penalties. Use concise and precise language. Instead of using generic terms like "due in four weeks," specify a specific due date.
You can also include a 'late payment policy' on your bills, notifying consumers that you will charge a late fee for bills paid past their due date.
Follow up with every client
Following up with each customer by phone or email is essential to getting paid faster.
If a customer says she will pay off her debt within two weeks, reach out to the customer and tell them that you will be in touch within a week to make sure everything is going according to plan.
A very effective way to collect late fees is to keep in touch with your customers at every stage of the project.
Check in regularly to avoid surprises when paying. Tracking your customers is essential to running your business. We cannot afford to wait for them to contact us.
Track all customers with overdue invoices, whether by phone or email. So, you know what they need and when they are ready to pay.
Offer a variety of payment methods
The easier it is to make payments for your customers, the faster you can get your money. Instead of waiting for the CEO to sign and mail a check, set up an online payment option.
The digital age has made it easier to accept credit cards and mobile payments, so you can have money in your account in days instead of weeks.
Businesses should consider multiple payment methods so that they can easily complete the transaction even if one fails.
However, some companies continue to offer cash-on-delivery services to consumers who do not have access to other payment methods.
Consider a Penalty
If you impose late fees, be careful about the amounts and how they are calculated. Show your commitment to payment terms by including late payment penalties. This can put customers off. Some companies make a profit by charging penalties.
Offer early payment incentives
Offer “early payment discounts” to get your customers to pay their bills on time. The amount of the discount depends on the customer and the amount of work. You can adjust your discount accordingly but remember that payment terms expire after the due date.
Digitize your billing and tracking processes.
For greater efficiency, the entire billing and payment process can be automated. Accounting software can help.
For example, Essentials Invoices is a great online application that helps businesses create, send, and record approved quotes in a single system. Businesses can receive real-time automatic updates of offer acceptance or rejection.
The writer is a Andrews Ayiku
University of Professional Studies Accra