Everyone likes to get paid, but how do businesses make this transaction faster when collecting from their customers? I spoke with Chris, our Accounts Receivables Guru, and he gave me insights into helpful tips for business owners.
Tip #1: Choosing customers. Not all customers have a good payment history and if you’re expecting your customers to pay at the same time, a company with poor payment history is one that you would want to avoid doing business with them unless you have a strict payment plan or process in order to mitigate risk. A way to check on a customer’s payment history is to run credit checks or trade references (be sure to actually call the references). We like to use Cortera for checking our customer’s credit history.
Tip #2: Payment terms. Net terms decide when your customers are going to pay. The longer the terms, the longer you have to wait for payment (and that’s hoping that they actually pay on time). If you set strict terms for your customers, it can help you receive payment faster. We recommend Net 15, but no more than Net 30.
Tip #3: Payment tools. It’s 2019 and there’s a lot of great technology available at our fingertips that allows for quick, easy, and faster payments. If customers are sending in check payments, you’re getting paid slower. Try to transition those customers to a self-serving payment option or being placed on a recurring auto-pay plan.
Tip #4: Payment options. If you only accept one or two forms of payment, you are narrowing down your customer’s options. Make sure your business has the capability to accept most forms of payment such as Credit Cards (VISA, MasterCard, AMEX, etc.), ACHs, Checks, Wire payments, etc. When dealing with payments that are automatically being withdrawn, you want to ensure that you have an authorization form on file for that particular customer. Authorization forms are easy, simple, and you get paid faster.
Tip #5: Credit limits. When you set credit limits, customers are likely to pay more consistently so they don’t max out their credit limit. This can be a great option for customers with poor credit history that are unwilling to be pre-pay or be setup on an auto-pay plan. When setting credit limits, we recommend starting conservative as the credit limit can always be adjusted at a later time.
Tip #6: Communication. When doing business, we all deal with customers that don’t pay. It’s important to have a strategy to collect payments from those customers. Communicating, documenting, and following up are crucial aspects to retrieving payment. Make sure you dedicate resources to attacking these problems since they can negatively impact your business and inhibit growth.
Tip #7: Billing. How you bill your customer determines on when you get paid. The method in which customers receive their invoices will affect when you receive payment. Standard mailing of invoices is slow, expensive, and antiquated. E-billing (emailing out invoices) is faster, inexpensive, more reliable, and environmentally friendly. No matter which method you choose, be sure that you are consistent with sending out invoices so your customers are able to pay on time.
Getting paid doesn’t have to be complicated. Just implement these easy tips and you can get paid faster and avoid uncomfortable conversations with your customers.
Author: Makita Wallen
Editors: Makita Wallen and Chris Schulz