When you run a small business, every penny counts which is why having your clients pay on time is essential. Whilst you can’t control your client’s actions, there are a few tips and tricks that you can use to help you tackle late payment problems. Sometimes it’s as simple as getting to know your customer better and creating a strong relationship with them to avoid recurring issues, or it may be that you can benefit from small business loans like invoice financing to help you manage your cash flow when your clients don’t meet the agreed terms. If late repayments are a common problem in your business, read on for more information on how to tackle it.
Know your customer
One of the simplest ways of nipping late payment problems in the bud is to get to know the customer and build a good reputation with them. This comes with two benefits. Your client is less likely to want to upset or lose you as a supplier if you have a good rapport with them. It also means that you will be able to chase up repayments more easily if you know you have a point of contact that you can get in touch with if payment doesn’t arrive when it’s meant to. Of course, this has its drawbacks if the relationship becomes strained because of late payments. But ensure you do all you can to keep the relationship your company has with your client strong, honest, and transparent means you’re less likely to suffer these issues in the future.
Agree on payment terms
You should ensure that your customers and clients are clear on your payment terms. This means you should set out clearly to them the term that you are expecting them to stick to, and the final date that you need to be paid. This way, you can have peace of mind that you have been clear and direct with your customer. If your customer does not meet your terms, you are within your rights to follow them up and remind them what was agreed.
Don’t let it escalate
With the last point in mind, when you have agreed on payment terms and payment does not come – it can be frustrating, but as a business, you shouldn’t let it escalate. Make sure that you get in contact with the client that has not paid as they agreed, not only will this help to give them a nudge should they need it, but it also allows them to double-check that the payment hasn’t gone elsewhere or fallen through the cracks. If you have a good relationship with your client, this will be easier, especially if you have a contact within the company that you talk to regularly. Try and encourage your clients to discuss their missing payments with you, rather than creating friction which may end up with them taking their business elsewhere.
Cash flow financing
Sometimes, especially if your payment terms are longer, late payments can cause problems when it comes to your business’s cash flow. The money that comes from your clients keeps your business running as it should, so when it’s not there, cash flow becomes tight.
Thankfully there are ways that you can ensure you’re getting the money from your invoices with various lenders offering invoice financing, meaning you can use those invoices as collateral, and they can give you a percentage of the sum owed so you can maintain a healthy cash flow. Terms differ depending on your lender but if you need money quickly, choosing invoice financing means you can benefit from money almost instantly and when you need it most.