Improve Your Cash Flow by Clearing These Payment Hurdles

Poor cash flow is a constraint on your business. Did you know that there are many payment hurdles keeping your clients and customers from paying you faster? Here are some tips on how to overcome these hurdles and minimize your outstanding payments:

1. Negotiate Payment Options Up-Front

People are used to doing business a certain way, and when your payment policies differ from what they are used to, they may find themselves unprepared to make your payment when it is due. You can avoid this problem by clearly stating your terms before you provide your goods or services.

If your terms are radically different from what your client was expecting and they’re already late with your payment then it makes sense to compromise with them on terms this time and insist your policies be followed in the future.

It is also a good idea to allow multiple payment plans, so that your clients can pick a schedule that works for them. However, not all business structures allow for clients to pick and choose which payment elements they like, and this can become complicated if you have many clients asking for different payment plans. Ultimately, all of your payment plans should work for you. It’s fair to ask for account payables within 30 days of your invoice. 

2. Confront Outstanding Accounts

You’re very busy, but it’s important to contact a client the moment they miss a payment. Your early and polite request will give them an opportunity to pay you if they simply forgot or made a clerical error. If not, this early pressure makes it clear that you’re paying attention to their account. It also minimizes their excuses later. They can’t argue they weren’t aware a payment was overdue if you contacted them about it immediately.

If they continue to delay their payment, you should be reminding them regularly, in an escalating tone, that their payment is past due. Remind them that your late payment policies may come into effect if they continue to default on their payment.

3.  Enforce Your Policies

Set policies for late payments and enforce them, otherwise routinely late clients will take advantage of you, to your business’ detriment. Claim interest where it’s due and if this isn’t part of your existing policy be sure to set a new policy explaining that late payments will accrue interest. Having to pay more money if they continue to delay payment is very motivating to clients, especially when they are strapped for cash.

4. Keep Struggling Customers and Clients with Factoring

You customers and clients might be struggling financially, whether their industry has taken a bad turn or their business is failing, or their personal finances are not in order. Of course, you feel for you clients because you have a good relationship with them, which makes overcoming this payment hurdle a challenge.

If you’ve decided to extend the payment period for a struggling customer, protect yourself next time and insist they make a deposit up front. You can also do this with habitually late clients or customers.

Alternatively, factoring is a solution to your cash flow problems that doesn’t require you to risk souring your relationship with your customers and clients in order to get paid. Through J D Factors you can get up-front accounts receivable funding as soon as you send out an invoice, and we take care of chasing down your customers for payment. We even take on the credit risk! Contact J D Factors today to learn more.