How can you avoid late payments and build better relationships with clients?

Setting clear expectations from your customers is vital and especially at the start of a relationship. " Here is what i am doing for you and in return here are my expectations from you" Who you communicate your policies is also key - your customers AP department and buyer should be clear what your payment terms are and what the consequences of late payment are in respect of future orders. Your sales and their buyers can be a useful ally in getting to the front of the payment queue

when I was running a private hire purchase business I had a written agreement with my customers stating payment terms, due date and preferred payment methods and consequences of late payment an example i take a 30% deposit as upfront payment to reduce the risk and show commitment if a customer defaulted in payment of an item the item may be taken and he losses 30% of the amount he paid as cost of operations and even that he gets a refund only after the item is sold.

Before commencing any project or service, ensure you have a written contract with your client outlining the scope, deliverables, timeline, and payment terms. This will help you avoid misunderstandings, disputes, and scope creep later on. You should also communicate your payment policies clearly, such as the due date, preferred method, late fees, and consequences of non-payment. If possible, obtain a deposit or upfront payment to secure your commitment and reduce your risk.

It is beneficial to invest in state-of-the-art invoicing software. Consider linking the revenue recognition event to your invoicing. For example, when goods are shipped out of the warehouse to the customer, a note is sent to the invoicing team or software to start the invoicing software. For revenue on longer-term contracts (e.g. consulting), consider developing a cadence of periodic invoicing (e.g. monthly). Prompt invoicing provides other benefits: lower working capital requirement and stronger internal control.

If you want to get paid on time rather than some time then you need to invoice your customer asap. Ensuring the invoice is correct and is sent to the right address as the delivery address may not be the same as the invoice address, The due date and how to pay should be clear and the more payment method options you can provide the easier it is for your customer to pay on time.

It is crucial to invoice promptly and accurately to avoid payment delays and build strong relationships with clients. This means your billing team should be well-trained and have access to efficient systems that can process invoices accurately and swiftly. Additionally, it's important that invoices are clear and detailed, so clients understand exactly what they are being charged for. By sending invoices immediately after work completion or product delivery, you demonstrate professionalism and keep your company's cash flow healthy.

In my experience many businesses are not proactive when it comes to getting paid as worried about making a collections call before the invoice is due. If that is the case then disguise the "collections call" as "customer service call" and by the way did you receive our invoice, " Is everything correct to enable payment by the due date ?" All of a sudden your customer is impressed with your follow up and customer service but also knows you take your payment terms seriously.

Maintaining regular follow-up on issued invoices is critical to avoiding payment delays. Implementing automated tracking systems or using financial management tools can help quickly identify outstanding invoices and take proactive steps to resolve any issues. Furthermore, regular follow-up also allows you to keep open communication with your clients, providing friendly reminders about payment deadlines and addressing any questions or disputes promptly and effectively.

Clients may not always be able to pay their invoices on the established deadline due to unforeseen circumstances or financial difficulties. In such cases, it's important to be open to negotiations and compromise where possible. This not only helps maintain a good relationship with the client but can also result in mutually beneficial solutions, such as installment payment plans or discounts in exchange for early payments. Being flexible and understanding in negotiations can be an effective strategy to avoid payment delays and maintain client trust.

Sometimes neither business-oriented processes nor actions are enough, and in these cases the human aspect has to take over. When a customer encounters financial difficulties or falls into arrears, open communication can make all the difference. By addressing the problem as soon as it arises, you show your commitment to finding solutions and supporting the customer in their challenges (a gesture that is much appreciated most of the time). This may involve discussions on payment plans, deferred payment options or even adjustments to the terms of the contract. By working together to find solutions that suit all parties, you build customer trust and loyalty, while minimising the potential tensions associated with late payment.