Small businesses are often hit the hardest when customers don’t pay in time. Overdue payments lead to liquidity problems. In the long run, this can thwart your company’s development.
Continually monitoring your customers’ solidity is one way to get a handle on customers that don’t respect your terms of payment. Here are some more tricks that can help you get paid in time.
1. Check who you are doing business with
Before your company does work for a new customer, you should always do a credit check to ensure that it is a company that historically has made timely payments. When you do a credit check, you get information about previous overdue payments, current cases of missed payments and information about a person’s or a company’s economic situation. You should strive to have a mix of customers from different industries.
2. Make your payment terms clear
Inform the customer about your company’s payment terms in good time. Information about when the invoice should be paid can be provided in the quote or in the order confirmation. By being explicit, you put pressure on your customer to pay in time. If your customer is not satisfied with your payment terms, try to find terms that suit both of you.
3. Ensure your invoices are easy to read
Be concise about your company’s terms of payment and bank account number. The invoice should include a specific date when payment is due, and a possible discount for early payment. There should also be an invoice number as well as the date the invoice is written and sent. Other important items on the invoice are the VAT and a description of the number and types of products or services purchased.
4. Send a payment reminder swiftly
Never delay in taking action to get paid. Invoice products and services as soon as possible, and send a payment reminder immediately when a payment date is missed. It is important to show that you are aware that you have not been paid on time. The reminder should be polite but formal.
5. Call and remind your customer
If a written payment reminder doesn’t do the trick, call the customer and explain that you haven’t received payment. Ask for the reason why the invoice hasn’t been paid and request they commit to a date when the payment will be made. Always follow up if you do not receive payment on the agreed date, but make sure to maintain a good relationship with the customer in spite of the delay in payment.
Getting paid on time for the products or services you provide is a fundamental factor in running a successful business. Make sure your terms are respected and you are paid accordingly by knowing your customer, communicating clearly and acting swiftly and decisively.
Sources: Företagarna, Grant Thornton, Swedish Tax Authorities