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According to research, 25% of business failures are due in part to late payments. Luckily, there are ways that you can mitigate the problems caused by late payments and even prevent late payments in the first place. If you’re worried that collecting a debt will damage your relationship with a customer, don’t be. Follow these steps to ensure that your cash flow remains consistent and your client interactions remain positive.
Ensuring Clients Pay on Time, Every Time
There is no single formula to ensure that your clients pay on time, but you can start by incentivizing early and on-time payments. The easiest way to do this is by offering discounts to customers who pay accordingly. You may also offer priority service to customers who pay early in order to reward their behavior.
It’s important that you establish clear deadlines and expectations surrounding payment, too. When you invoice a client, a clock should start ticking, and you should expect payment within a specific time frame. If this expectation isn’t clearly communicated to your clients — or if there’s no clear expectation at all — you’ll likely see a lot of late payments.
You can communicate expectations by explicitly including them on your invoices. Establishing an effective and immediate invoicing system is imperative to ensuring you’re paid promptly. You can easily create professional invoices using a template selected from a library of pre-made documents. Design an invoice that features your company branding and logo alongside clear instructions for paying on time.
Minimizing Damage to Relationship After Late Payment
If you follow all of the steps above, you will probably see far fewer late payments, but it’s unlikely that you’ll ever eliminate them completely. It may feel confrontational to continuously seek payment from a client, but you can lessen this feeling by presenting your efforts as a form of accommodation. Offer your clients a wide range of payment methods to demonstrate that you value their business and want to make payment easy.
To this end, payments should never be handled punitively. If you work with a client who habitually abuses your payment policy, it maybe reasonable to end your professional relationship, but most late payments are due to a mistake, not malice. Some businesses find that assessing late fees is an effective deterrent, but it also runs the risk of alienating clients.
Most importantly, you should always express gratitude to your clients when you receive payment — whether it’s late or on time. Clients want to feel appreciated, and a simple “thank you” can smooth over the awkwardness surrounding a late payment collection. It’s important to be sincere in your thanks and invite the customer to return in the future.
Avoid Late Payments With Incentives and Accommodations
Your relationship with your clients is the foundation of your entire business. If you’re struggling to receive on-time payment, though, it can affect your bottom line. You can encourage your customers to pay promptly by invoicing them immediately, setting clear payment expectations, and incentivizing early payment. Using an online invoice maker makes a huge difference. If you’re collecting a late payment, though, it’s important to extend grace — so long as your clients are not abusing your policies.
Give your clients plenty of payment options and provide them with a professional invoice to ensure they understand payment protocol. When you do have to collect late payments, do so with patience and gratitude.
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