How Can You Get Your Customers to Pay on a Timelier Basis?

How Can You Get Your Customers to Pay on a Timelier Basis?
AllBusiness.com

If you find that a number of customers are slow to pay, or dragging out making payments, there are useful tactics you can try, to get paid faster.

Try the carrot and stick approach to get your customers to stop being deadbeats.

First, you can offer them a discount for early payment. Consider adding the following clause to your invoices and contracts:

"Early Payment Discount: The customer shall be entitled to receive a discount on the bill of two percent (2%) of the face amount of the bill. In order to receive this discount, we must receive full payment of the bill within ten (10) days of our sending the invoice."

The stick approach is to charge a late fee if the customer does not pay within the time period required. Here is a sample clause for your contracts or purchase orders:

"Customer Payment Policy: All payments must be received by ABC, Inc., within 20 days of the date of invoice. Any payments received after said date will be deemed late and subject to a late fee equal to 1-1/2 percent per month of the outstanding unpaid amount. The customer is also responsible for all attorneys' fees, court costs, and related expenses incurred in the event payment is not made in a timely manner, and proceedings are brought by ABC, Inc. to collect sums owed."

Another prevention measure for accounts receivable is good cash-flow management. Our Buyer's Guide to Cash Flow Management Tools explains the principles of that process and introduces the vendors of software that can help with cash management. Our Buyer's Guide to AP and AR Software and Services breaks down the key accounts receivable and accounts payable functions and tells you about the kind of support you can buy in those specific areas.

If it comes to pushing the collections efforts a step further, you'll want to know the FTC Guidelines to Fair Debt Collection in order to keep your processes legal.

Find practical business advice and tips on common business issues such as HR , accounting, marketing and more at AllBusiness.com.