We all know that late payments can be counted as one of the top causes of cashflow problems for many businesses today. Imagine this: one big corporation fails to make its payments to one of its suppliers on time – what happens is a kind of ripple effect which trickles down through the entire supply and distribution chain and wreaks havoc on all the other businesses relying on that big corporation.
So if you don’t want to deal with late payments, what should do you do? The good news is that there are certain things you can do in order to at least reduce the risk of late payments for your enterprise.
Learn more about your customer
The first thing you can do as a small business owner is learn more about your customer. If you want to manage your credit properly, you should make it a point to get to know your clients and what their situation is. For instance, before you even begin doing business with a customer, you should find out their exact legal name and status and do a credit check of their business if you can. But even if you do a credit check, you should also make it a point to ask for references from their other suppliers so you can make your own conclusions based on your assessment of the customer’s paying ability.
Be clear with your terms of payment
Another thing you can do in order to avoid late payments (or at least reduce their likelihood) is to be clear from the very beginning with your terms of payment. Your policy on credit should be clearly defined. Do not simply assume or believe that you will receive the payment after 30 days or at the end of the month – this should be stated in writing. You should also make it a point to obtain a written acknowledgement from your customer which shows that they understand your terms. In case there is a dispute, you can use your client’s signature or acknowledgement as proof.
Make sure your invoices have the right details and information
When it comes to your invoices, you have to make sure that they contain accurate and detailed information so you can avoid disputes. Double check your invoices before they are sent out to insure that they contain the correct information, and see if your invoices include a precise specification of the products or services that have been rendered. Your invoices should also have the correct customer order number every time.
Encourage your customers to pay on time or even in advance
You can also do your own part in making sure that your clients pay on time – and even in advance. First of all, print your invoices clearly and make your terms of payment easy to read and understand. You should also make sure that your invoices are sent well in advance of their due date, and then call or contact your client to confirm if they have received the invoice. You should also set out clear and concise guidelines and policies regarding late payments, especially when it comes to additional fines or charges for late payment. Yet one more method of encouraging on-time or early payment is to offer discounts or promotions for the prompt settlement of accounts.
Late payments can be avoided by following the above-mentioned tips. But if you want to do away with cash issues altogether or invest in assets that can help your business grow but are lacking the funds, you can rely on cashflow services such as the ones offered by Ultimate Finance to help your enterprise move forward.