No Automatic Credit Extension for New Customers
Small businesses, just like large corporations, need to establish credit policies that outline the guidelines for determining which customers will be extended credit and under what terms.
Receiving a Portion of the Amount Upfront
If you’re concerned about not getting paid when selling a product or providing a service, you can request an upfront payment or a retainer if it’s appropriate in terms of the price of the goods or services. You can ask for a percentage of the expected invoice or a specific amount as a retainer before you start working on the project, with the remainder due upon completion.
Invoicing Quickly
Invoices should be prepared as soon as goods or services are delivered or as soon as possible thereafter. Failing to do so can make your business appear indifferent to getting paid and can unnecessarily slow cash flow. Small business accounting software and point-of-sale systems can help facilitate invoicing.
Clearly Define Payment Terms
If you like to get paid on time, don’t leave it up to the customer to decide when to pay your invoice. Instead, ensure that your invoices clearly state the payment terms, such as “Payment due within 30 days” or “Due date: 30 days from receipt.”
Reward Customers Who Pay on Time
Offering a reward for customers who pay their invoices on time can help you get paid faster as well. For example, if your standard policy is that payment is due within 30 days, you might offer a small discount, such as 2%, for customers who pay within 14 days.
Create a Follow-Up Procedure for Customers Who Miss Payments
The sooner you follow up on overdue payments, the more likely you are to get paid. So set up a system for tracking overdue payments if necessary and a standard procedure for contacting the customer once their payment is late. You can start with a phone call to reach out to the customer. Sometimes a person may just have forgotten or overlooked the invoice, and a quick phone call may be all that’s needed. This will also mean you can get paid without going through any of the other collection procedures.
Turn Over Delinquent Accounts to a Debt Collection Agency
When you’ve employed all of these precautionary methods for getting paid regularly, you may still face some delinquent accounts. When all other tactics fail, it may be time to send the account to collection agencies.
Frequently Asked Questions (FAQs)
What is the best way to collect payments from customers?
The best way to collect payments from customers is any method that is easy for them. The easier it is for a customer to pay, the easier it is for you to get paid. If you can, offer a variety of payment options from an online system that accepts debit and credit cards to invoices, cash, checks, and bank transfers. Ask the customer about the best way for them.
How can you collect digital payments from customers?
To collect digital payments from customers, you may want to use services like PayPal or Venmo. You can also set up an online billing payment gateway through companies like Bill.com that can assist in facilitating the process. For digital payments at the point of sale, you can work with brands like Square.
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Sources:
Experian. “How To Run a Credit Check on Your Customer.”
CalMiner. “The State of Debt Collection 2020: Industry Statistics, Trends, Collection Practices, and More.”
Bureau of the Fiscal Service. “eCommerce Collections – Digital Initiatives.”
Source: https://www.thebalancemoney.com/how-to-bill-a-customer-2948033
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