Every small business owner has a tale to tell of being burned. When they’ve delivered some work to a customer that didn’t pay. Late or non-payment for work is especially a problem for project-based businesses that deliver work prior to invoicing for payment. Whilst one late payment here and there can be covered, defaults can quickly add up to a cash flow crisis.
To help you understand more about what to do if your customer won’t pay, our friends at Clear Books propose four strategies for you to consider, so that you can reduce your debtor days and get cash flowing.
1. Partial payments
A popular way to get greater cash-flow certainty is to ask your customers to make partial payments. This could be putting up a 50% deposit to secure your team’s capacity for the project, or asking for a series of staged payments made at increments throughout the job.
To make partial payments easier to request of customers, you can often position these payments as covering materials or labour expenses that you might incur by taking on the project.
An added benefit of partial payments is that your details will be set up in your client’s online banking system as soon as the deposit is made. That means any future payments will be easier to make, because your client won’t have to look up and re-enter your account details.
2. Set up a direct debit for a future date
If you know the date of completion for your project, you can ask your clients to set up a direct debit for a future date and send you a screenshot to confirm that you’ll be paid. This tactic is common in real estate where a tenant needs to set up a recurring transfer before they move into a property.
3. Improve the payment options you provide
The easier you make it for your clients to pay, the quicker they will generally do so. There are lots of clever ways to get paid without having to go to the expense of acquiring a credit card terminal from the bank.
Firstly, try listing your details clearly on invoices and on your website. Providing clear details makes it easy for customers to set up direct debits. Alternatively, you can link card payment services like PayPal to your invoice so that clients can click to pay.
4. Remind yourself to get paid
Businesses that get paid on time are usually on top of their cash flow. By keeping up-to-date records of who owes money, and setting up reminders to check if they’ve paid or not, you will ensure that you always know what’s paid, what’s outstanding and what is overdue.
If you don’t want to spend the time and effort closely tracking and chasing up clients, accounting software like Clear Books can remind your customers automatically the moment the due date passes. It’s like having a personal debt recovery manager without the personnel expense.
Clear Books Micro is online accounting software that’s made for Excel spreadsheet users. It’s free for small businesses and will help you stay on track with financial tracking as you grow. Try it today, and then ask us how to best interrogate the data you collect.