Tired of chasing down past-due invoices? What if you could devote more of your time to growing your business rather than begging customers for the money they owe?
To collect receivables on time, you need a plan that addresses them before and after a sale.
The best-case scenario? You don’t even have receivables! Bills are simply required and paid at the time of delivery. However, this may not be a realistic option, depending on your business, your industry, and the types of products or services you offer.
Fortunately, there are other steps you can take to rein in your receivables, reduce the time between delivery and payment, and spend less time following up!
What to Do BEFORE a Sale
1. Determine Whether Your Customer Can Pay
Large companies may check a customer’s credit, but this isn’t an option for many small businesses. What you can do is require a deposit or down payment.
Of course, you don’t need to implement this policy across the board—only for new customers. How they handle a down payment will give you a good indication of their ability to pay the balance.
2. Make Sure You’re Providing Value
We’ve all felt duped by a slick sales tactic or disappointed by a low-quality product. The last thing you want is for the roles to be reversed and for your customers to “get even” by withholding payment.
Instead, review your products and services to make sure they meet your customer’s needs. You don’t want to overpromise or underdeliver!
3. Incentivize Prepayment
If you can’t enforce a deposit or down payment, the next best thing is to allow prepayments as an option. Of course, most customers aren’t going to prepay when given the choice, so provide an incentive for doing so. For example, you could offer a bonus product or service that provides extra value!
4. Hold Off on Delivery Until Payment Is Received
While this isn’t feasible across every industry, hanging on to your product or service until you receive payment ensures that your customer holds up their end of the bargain.
At a minimum, review your payment terms with the customer so they’re aware of their obligations. This should eliminate any excuse the customer might have for nonpayment.
5. Speed Up Your Invoicing
Don’t get into the habit of sending all of your invoices out at the end of the month. Always submit your invoices as soon as your products or services are delivered. The sooner you invoice, the sooner you can get paid!
What to Do AFTER a Sale
6. Remind Your Customers of the Value They’re Receiving
Throughout every phase of the sales process, stress the value you’re providing. If your customer is aware of their need for your products and services, they will be more motivated to pay your bill once you deliver.
7. Call Your Customers Shortly After Delivery
Calling a customer to confirm that they are satisfied with their purchase is one of the easiest ways to encourage payment, stay top of mind, and even upsell and cross-sell other add-on products and services.
If you can’t do this for all of your customers, prioritize your largest accounts!
8. Automate Payment Reminders on Past-Due Accounts
Let’s face it—you likely don’t have the time or, frankly, the patience to follow up with every individual on past-due invoices.
Fortunately, you don’t have to! Set up a system where automatic reminders are sent whenever an invoice goes unpaid for a certain number of days.
9. Call Your Customer After 60-90 Days
Once an invoice becomes 60 or 90 days past due, call the customer personally. If the customer has an issue with your products or services that is preventing payment, this is your opportunity to remedy it. It might even be your last chance to keep the customer!
If there’s no issue, simply ask the customer for payment. If they are dealing with a financial hardship, work with them by offering a payment plan or flexible terms.
10. Write Off the Balance and Part Ways
If you’ve exhausted all options and are still unable to collect payment, don’t waste any more of your valuable time with that customer.
Learn where your sales and collections process failed and focus on the customers who like your products and services, appreciate the value you provide, and are both willing and able to pay!