Australian small businesses are owed billions of dollars at any given time, so late payments (also known as delayed receivables) is a common challenge for business owners. When your clients don’t pay for your goods or services in a timely manner, your business can struggle. A lack of cashflow makes it difficult to pay employees and freelancers, buy more inventory and invest back into the business.
Luckily, there are ways to keep customers happy and still get paid quickly. Here are some tips that that can help speed up the collection of payments.
This one seems obvious, but a lot of small business owners delay administrative tasks like sending and managing invoices because they prefer working on the things that make them passionate. The problem is, the longer you wait to send an invoice, the longer you wait to be paid.
Online invoicing can help you create and send professional invoices as soon as work is completed. Plus, in a few clicks, customers can quickly and easily pay the total owing.
If you’ve been waiting for money to hit your bank account with a manual transfer, consider offering more payment options. Instead of accepting only bank transfer or cash, let customers pay by credit card through a service like PayPal. They may be more likely to pay in full and on time if they don’t have to triple check account numbers or have the cash with them.
Like you, your customers are busy and can overlook an invoice. Reminder emails are a polite way to remind your customers payments are due. With tools like PayPal Invoicing, you can easily track and send out reminders on unpaid invoices. If you’re still not getting a response, encourage customers to reach out if they’re having trouble paying on time.
Tip: Make note of when you contact customers regarding collection of payment. Keep dated copies of physical correspondence along with notes on phone and in-person conversations. In the event of legal action for non-payment, you may need this documentation.
Being able to collect some income each week or month is better than getting nothing at all. If your cash flow allows, consider letter customers make instalment payments until the debt is paid. You can do this by enabling partial payments on your PayPal Invoices.
Encourage customers to pay on time with a financial incentive. For example, offer a 5% discount if they pay the balance in full within a set period. An offer like this can mean significant savings to those with large balances and be a huge incentive for them to pay quickly.
Don’t wait until you provide the service to collect payment, ask for a deposit upfront. Collecting a 25% deposit before you start work can help both your cashflow and your customer’s.
Don’t wait to contact a customer regarding a missed or late payment. The more time passes, the harder it will be to collect payment. When a customer falls overdue, reach out quickly to find out why.
Tip: Avoid being confrontational when discussing missed or late payments. Keep conversations calm and amiable, while making sure your customer understands you don’t take late payments lightly.
If a customer’s habitually late with payments, don’t extend the payment window. Change invoices to state that payment is due on receipt or require them to pay in full before you provide the service.
This is not anyone’s favourite option but if nothing’s working you might want to consider hiring a collection agency. In most cases, they’ll charge a percentage of the late payments you’re trying to recover or buy a portion of the outstanding receivables from you and then try to collect the money themselves.
Speak with a lawyer. A commercial lawyer can help determine the best option for the situation.
But remember, the best thing you can do is keep your customers happy. Happy customers are generally more likely to pay on time. And it’s often the small things that help let them know their business is valued. From sending hand-written thank you notes to engaging with them on social media, it doesn’t take much to remind them their business is important to you.
If you’re facing a cashflow crunch, consider PayPal Working Capital1 as a tool to help give your business some relief.
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