5 Tips to Counteract Slow Paying Clients
The due date on the invoice you sent is now several weeks past due, and it isn't the first time this has happened with this customer. No matter what type of business you operate, you're bound to experience them. Under most circumstances it makes sense to give customers the benefit of the doubt. Their habitual late payments, however, can hurt your cash flow. That's bad for the financial health of your business, so you're wise to take action to nip the problem of late payments in the bud and prevent new clients from becoming late payers. You may want to begin using one or more of the following tactics to motivate your clients to pay on time:
1. Choose your words carefully. Using phrasing like "payment due within 20 days" rather than "net 20" makes it easier for customers to identify the time frame in which payment is due. And although "due upon receipt" may sound urgent, it gives your customers too much wiggle room.
2. Institute a late payment fee. Unfortunately, not all customers will be motivated at the prospect of saving money. They might pay up on time, however, if paying late comes at a cost. Even an amount as small as 1.5% might grab their attention and get that check in the mail.
3. Give the option to pay electronically online. By enabling clients to pay instantly through an online payment service like PayPal, you make it more convenient to pay. And it allows customers who are short on funds to pay using their credit cards. That way, you're not stuck waiting until they have money in the bank.
4. Send a gentle reminder when an invoice is a week past due. In many cases, invoices simply get lost in the shuffle. By politely following up with clients after invoices are a week past due, you can put them back on your customers' radar.
5. Do not do more work for the client if their account is 30 days past due. Tough. Love. Sometimes temporarily ceasing to provide services or products is the only way to get a client to understand paying you isn't optional.
While there's no guarantee any of these will in every case prevent late payments, they will work with some customers-and you'll have the peace of mind knowing you're doing what you can to alleviate the issue. Regardless of how you decide to go about minimizing the problem of late payments, make sure you're upfront about your payment terms and conditions in your client agreements and on your invoices. Communicating clearly and allowing no room for misinterpretation gives you leverage when following up with clients who have run behind on paying. Regardless of how frustrated you may be, keep your cool and remain respectful when checking on invoices that have gone overdue.
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