Avoid “Past Due” Situations with the Proper Procedures
Put procedures in place to avoid “past due” situations
COVID-19 has caused many businesses and individuals to be strapped for cash and experiencing difficulty paying their bills. If you’re running your own business, outstanding invoices can play havoc with your own cash flow.
Some businesses are offering payment extensions to their customers. But if your financial situation isn’t, or is no longer, allowing you that courtesy, there are steps you can take to help ensure you get paid.
In the beginning
Before your transaction with the customer, share a written summary of the project’s scope and fee. Capturing the terms in writing helps minimize future disagreements that can delay payment.
For larger projects, try to negotiate that installment payments be made after you complete specific stages of the work. This offers some assurance that even if some difficulty occurs — such as the customer running into financial trouble or the project being canceled before completion — you’ll at least receive something for your efforts.
Invoice your customers promptly. It’s easy for this important task to get pushed aside by the crunch of ongoing business. Many businesses are backed up because of COVID-19–related closures or delays last spring or summer. But the more quickly you invoice, the more quickly you’ll be paid.
Invoice accurately. Ensure that you’re sending the invoice to the right person at the right address. Sending it to the wrong addressee will delay payment until it lands in the correct inbox. Double-check arithmetic, as errors also can lead to delays. If your customer requires a purchase order number to issue payment, obtain one and include it on the invoice.
Break out the charges. Provide enough detail on the invoice that the customer can easily identify the services or products for which he or she is being charged.
Offering payment options is perhaps more important now than in “normal” times. Customers may pay more quickly when they can use the method they find most convenient — whether they prefer paying by credit card, by check or via an online payment platform.
Another helpful strategy is to consider early payment discounts. You can motivate some customers to pay more quickly by offering to shave a percentage from the invoice total if they pay before the agreed-upon due date.
A polite email reminder, sent before payment is due, can nudge customers who may have overlooked your invoice. Some software programs can be programmed to send reminders automatically.
Follow up right away. Contact the customer once you notice a payment is late. A polite email or text reminder asking the customer to correct the oversight often is enough to prompt action. But if you’ve sent several texts or emails and still haven’t received payment, a phone call may be in order. Many people find it harder to ignore or evade questions over the phone.
Throughout the payment process, remain polite. Especially in larger companies, it’s possible the person with whom you’re talking isn’t aware your invoice is overdue. Polite assertiveness can help you both get paid and maintain a good relationship with the customer.
Procedures are key
Create an inhouse collection policy. Put steps, such as the ones described above, in writing. Your staff (and you) will be more successful in getting customers to pay their bills promptly if you have procedures in place and follow them.
Need further assistance? Speak to one of our business advisors to help you ensure your financials are in order.