8 Simple Ways to Encourage Your Clients to Pay on Time

Trying to get invoices paid faster can seem like an uphill battle. These are the people who have helped you build your business. Preserving?client relationships ?is essential. At the same time, any client who owes you money for goods or services you’ve delivered is a debtor. You’ve already earned that money and deserve to be paid in a timely manner. On this page, we’ll walk you through how to bill customers effectively and ways to encourage debtors to pay on time so you can spend more time growing your business and less time chasing payments.

The Importance of Prompt Client Payments

More than half of all businesses say collecting payments from customers takes too long, and 45 percent say their clients don’t pay on time, per?SmallBizTrends . You’re likely sending multiple invoices and making calls during this time, which takes up your time and costs money. Meanwhile, your business is missing out on cash that would otherwise be used to make payroll, begin the next customer order, invest in business growth initiatives, or cover other expenses.

We also know that the longer an invoice remains outstanding, the lower the chances are of the customer paying at all. Around 1.5 percent of receivables are written off as?bad debt , according to?TSI . If your business brings in $1 million per year, that’s $15,000 you’ll never see.

Knowing how to get paid faster is the first step in reducing that figure. When you get slow-paying clients to make payments promptly, it’s easier to manage your cash flow, and you can focus on your business more.

8 Simple Ways to Encourage Debtors to Pay on Time

Many business owners want to know how?to?collect money from clients?who won’t pay or how?to?convince a customer to?pay?their debt. It’s not about learning how to persuade a customer to make payment. There should be no convincing. Follow the tips below, and you’ll likely see payments accelerate without any special effort.

1. Build Strong Client Relationships

Treating your clients well makes them less likely to jeopardize the relationship by paying late. From a business perspective, it’s not in their best interest. Happy, loyal customers also tend to feel invested in your success and won’t want to disappoint you by missing a payment deadline.

2. Set Clear Payment Terms

Always provide clients with upfront payment terms and your late payment policy before any work is performed or goods are delivered. These should be freely accessible on your website, included in bids and estimates, part of any contracts your clients sign, and shared with invoices.

Make things as simple as possible. For instance, people often use terms like “Net30” and “Net60.” These aren’t clear payment terms. Use phrases like “payment due in 30 days” instead. Also, ensure the due date is clearly written at the top of the invoice, so there’s no question about when they need to pay, and no math is required.

It’s also worth noting that clients will typically take whatever time you give them to pay. If you allow them 30 days, they’ll take it. If you give them 60 days, they’ll take that too. Minimize the payment window as much as possible, and you’ll naturally see faster payments.

3. Invoice Promptly

If you’re worried about encouraging prompt payments, ensure you’re invoicing promptly too.?Your clients aren’t going to think paying is an urgent matter if you don’t behave like it is. Rather than waiting for the start of the month or bi-weekly billing cycle, send an invoice out the day work is complete, or goods are delivered. Because invoicing can be expensive and multiple reminders are often sent, consider?automating your invoice process ?to save time and money.

4. Make it Easier for Clients to Pay

Offer multiple ways for clients to pay their invoices, so they can use whatever method is best for them. If possible, digitize the process and let them pay online too. As you roll out your new options, don’t worry too much about how?to?encourage?customers to?pay?online. Just ensure they can do it through your website and include instructions on your invoices. They’re likely to adapt quicker than you expect.

5. Consider Offering Incentives for Early Payments

Even a small incentive for paying early can move your invoice to the top of their stack of bills. If you decide to offer one, ensure it’s prominently listed at the top of the invoice. You’re likely to get better results if you pair this with a digital reminder too. For instance, send a text message or email the day before the deadline reminding them that they have 24 hours to claim their early payment discount.

6. Implement Penalties and Late Payment Fees for Slow-Paying Clients

Many small-business owners are worried about the impact of charging late payment penalties, but they’re common in most industries. Take a look at what your competitors are doing, especially larger companies within your niche. You may find a variety of models, including a flat late penalty fee or interest charges. Some will also require habitual late payers to begin providing payment upfront, before goods or services are delivered. Others will dismiss clients and refuse to serve them.

Ultimately, your policies are your decision and can be tailored to meet your needs. Be considerate to your clients, though, and make sure all penalties are communicated with them before you begin working together, each time an order is placed, and before you apply the penalty.

7. Keep in Touch and Send Friendly Reminders

On an invoice’s due date, the likelihood of receiving payment drops to just 95 percent if it hasn’t already been paid, according to research from the?Commercial Collection Agencies of America . The likelihood of collecting drops to 89 percent when an invoice is 30 days overdue. If an invoice reaches 90 days overdue, the likelihood of collecting drops below 70 percent.

That means every day matters when a balance is overdue. Staying in contact with the client keeps you at the top of their mind. Each contact is also an opportunity to connect with the client meaningfully.

Many business owners have concerns about how to approach a customer for payment without creating friction. The trick is to handle it from a customer service perspective rather than a collections standpoint and to use automation to reach them as much as possible. Reminders should trickle in before the payment is due to ensure they remember the deadline. Then, a reminder should be sent the day after the deadline. This can be a friendly message, such as “Oops. You missed your payment. We can waive the late fee if you pay within the next 24 hours.” This approach is very effective, especially when paired with a link to an online billing portal.

8. Partner with an Invoice Factoring Company

While invoice factoring may not directly speed up your clients’ payment timeline, it ensures your business gets the cash faster. With?invoice factoring , a?factoring company ?buys your unpaid B2B invoices from you at a discount. You get most of the invoice’s value upfront and can spend it however you wish. The factoring company waits for payment, then sends you the rest minus a nominal factoring fee once the client pays their invoice.

When you partner with a company like Viva, you’ll also benefit from collections services, so you no longer have to chase invoices, and client credit checks, to help ensure your clients can pay their invoices. Plus, we make it easy for your clients to pay and provide white-glove customer service so they stay happier too.

Get a Complimentary Invoice Factoring Rate Quote from Viva

If invoice factoring is the solution for your slow-paying clients, Viva can help. To learn more or get started,?request a complimentary factoring rate quote .

Original Article: 8 Simple Ways to Encourage Your Clients to Pay on Time