How to encourage your customers to pay on time, every time
09/03/2020 / Comments 0
Five tactics you can use to encourage your customers to pay on time, every time.
We’ve spoken a lot recently about tactics that you can use when an invoice goes overdue to get paid faster.
But what’s more important is the steps you can take to encourage your customers to pay on time so that it doesn’t reach that stage.
Here we share five tactics you can use to encourage your customers to pay on time and reduce the impact of late payment on your business.
1. Invoice on time
When it comes to getting paid on time one of the most overlooked tactics is the invoicing procedure itself.
It’s vital that as soon as your goods or services have been provided you send your customer an invoice. Any delay you make at this stage could give your customer an excuse to stall payment.
Transitioning to a digital invoicing system could significantly speed up your invoicing process and reduce late payment as it avoids the need to print, post and process hard copies.
2. Keep in touch
A good way to encourage your customers to pay on time is to build a good relationship and keep in touch throughout the credit period.
By making regular courtesy calls to your customer you ensure that your invoice stays front of mind.
Whilst many people prefer corresponding through email or letters you can make much more of an impact over the phone. Plus, it’s easier to spot when customers are giving you the runaround.
Make sure that the person you are in contact with is the person responsible for paying you and always keep a record of letters, emails and phone calls.
This information could be useful evidence if there is a dispute or you end up taking your customer to court.
3. Communicate your late payment policy
Your Terms and Conditions are a major component of keeping your business competitive and they can also be a great way to encourage prompt payment.
By demonstrating from the outset that your business doesn’t tolerate late payment and specifying the actions that would be taken, the chances of getting paid within terms will improve considerably.
Your late payment policy could include charging late payment interest, stopping services and outsourcing the recovery of the invoice to a debt collection agency.
4. Reward prompt payment
Early settlement discounts provide an incentive for customers to pay promptly, ensuring you get paid within terms and reducing the cash flow gap between paying suppliers and receiving payment.
Whilst this means you would get paid slightly less, it can be more beneficial to your business to be paid the majority of an invoice’s value early than it is to receive the full amount outside of terms.
If you don’t want to offer an incentive at the very least you should say thank you when you receive payment.
Not only is it polite, but it also shows you’re grateful for their custom, improves customer relations and can lead to subsequent sales.
5. Stick to your late payment policy
If you apply strong credit control processes for a short period and then slacken off, you’ll lose many of the benefits. So, be consistent in your efforts to achieve the best results.
There’s no point having a late payment policy in place if you never follow through on your warnings.
If a customer knows that they can get away with paying late, they are likely to continue doing so in the future.
For more ways to improve your processes take a look at these 101 ways to improve your credit management.