Put Billing Details in WritingOne of the most effective tools for collecting payments is also one of the simplest: putting billing details in writing. A clear invoice will spell out the service or sales item and any associated fees. Also, include details on late payment penalties and interest.
Use ContractsA service or bill of sale contract is a legal document that outlines the terms of business transactions and what happens when payments are not made promptly. Include the terms, dates, parties, and conditions for terminating the agreement in the contract to avoid confusion or disagreement.
Send a Reminder NoticeSend a reminder to customers between seven and 14 days before their payment is due. Include the full details of their invoice and any penalties for late or missing payments. Customers are more likely to pay their invoice on time if they understand what's due and when.
Offer Competitive Payment TermsMost companies offer a net 30, which means customers have up to 30 days to pay their invoices. Offering the lowest payment terms, such as 60 or 90 days, is an excellent way to win customers from competitors, but it might result in customers taking advantage of those terms. For companies that offer longer payment terms, make sure you can afford the volume of receivables and factor in collections and bad debt costs.
Make it Easy To PayThe easier you make it for customers to pay, the better. Most consumers prefer online payments, but phone and mail options are also important. Failing to provide customers with an easy payment method can lead to invoice disputes and late fees.
Consider an app for your customers to pay their invoices. This option is becoming increasingly popular and is a great way to boost customer retention. Digital billing is also an ideal way to reduce paperwork and save time.
Charge InterestAnother way to prevent late invoices is to charge interest on past due balances. Late payment interest rates typically range from 1%-5% per month. State the interest rate in your contracts and invoice forms to avoid confusion. You can also add a flat late fee. The additional charge will motivate customers to pay on time.
Provide an Incentive for Early PaymentOffer a discount or other motivation for customers who pay early. This is an excellent way to encourage customers to complete their payments and prevent late payments. For example, you could give a 5% discount for early payment or waive the late payment fee if the invoice is paid within seven days of its due date.
Secure Payments With These Easy StepsNo one wants late payments or the fees associated with them. Help customers avoid past due balances with easy payment options and incentives to pay on time.
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Article written by Eleanor Wyatt