Some of the following ideas and options might help encourage your customers to pay on time – or before payment is due.
1. Ask for upfront payments
Try it with your regular customers, ideally those who always pay ahead of time.
Another option is to be able to accept payment online or in person when the goods or services are delivered.
2. Invoice immediately
Be prompt with invoicing, clear on the payment due date, and explain your payment terms. It’s also important to include the implications of paying late, too. Consider offering customers different ways to pay.
3. Offer a discount for early payment
Offering your customers a discount can encourage them to pay ahead of the date that payment is actually due under your business conditions or contract.
It’s important to do some number crunching with this, though. You want an offer that helps with your cash flow, not one that slows it further.
4. Remind, then chase
Set up a payment reminder calendar that you update when you send an invoice. The idea would be to alert you with a reminder before a payment is due. Remember to cancel the alert once a payment has been made.
If the due date has passed, you’ve got no choice but to chase. Call your customer first. It shows you’re serious, but gives your customer the chance to explain why there might be a delay.
5. Tailor to your customers
Understanding how different customers contribute to your revenue is key. You may be able to tailor your payment terms to different customers.
For example, if one of your customers is responsible for a larger than average proportion of your revenue, it may be worth offering special terms to incentivise them to pay ahead of time.
For customers that you constantly have to chase for payment, you might want to consider other ways of managing the relationship, such as cash payment at the time of the sale or service transaction.