Ways To Make Sure You Collect Payments From Consumers And Clients
Which small business owner has not worried about collecting payments at some point? Whether it is the number of consumers that run overdue accounts or a client who is reluctant to pay for the completed job, not getting the payments timely is the most frustrating aspect of running a business. And when not getting paid halts the business' cash flow, that could be dangerous as well.
There are ways to make sure you collect payments for your goods and services. They are:
Do not extend credit automatically
Small businesses, like large businesses, need to have credit policies that offer guidelines for deciding which consumers or clients will receive extended credit and on what grounds. Doing credit checks pays off. You might have a policy not to accept payments through personal cheques, but only cash, and debit or credit cards.
If you consider extending the credit beyond that specific point to consumers, you must set up a process to fill out the credit application or do a consumer check.
Take advance payment
Are you concerned that you will not get paid for that sale or service? If it is sensible for the price of the goods and services, ask for a deposit or retainer upfront. This is a standard business practice for higher-ticket item and services. No reasonable consumer should get offended by such a request.
For example, if you offer services, you might charge a percentage of the projected receipt or a set amount as a retainer before starting to work on the project, with the remainder due on the task completion. You could also break the bills into thirds, asking for a third before the work begins or midway through the project or upon completion. The best part about partial payments is you know that you will get paid something even if the consumers default the bill.
This is a no brainer. If you want to collect payments timely, prepare and present the consumer invoice immediately upon delivering goods and services or as soon as reasonably possible. Not doing so can make your business look indifferent to getting paid and slows the cash flow. Waiting to prepare the invoices at month-end, for instance, means you add 30 days to your cash flow conversion period.
State payment terms clearly
If you like to accept payments promptly, do not leave it up to the consumers to decide when the invoice should be paid. Instead of providing vague invoices, make sure it specifies the terms such as 'payable within 30 days' or mention the due date.