Getting timely payments out of business clients is an uphill task, particularly when you’re not yet in a position to dictate your own payment terms to indispensable customers. Seasoned small business owners, however, have several tricks up their sleeve to make sure clients process unpaid invoices well within the credit period.
If your business has been grappling with poor cash flow because clients just won’t pay up, here are a few tips to get your B2B clients to clear pending payments faster.
Adopt a firmer approach to invoicing
More often than not, a business is itself somewhat responsible for clients treating their invoices as low-priority. Do a thorough review of your accounting processes and ask yourself and your team the following questions:
- Are we sending invoices on time?
- Is there scope to introduce late payment penalties for some if not all customers?
- Is there room to incentivize timely payments with discounts and special offers?
- Do we need to review our credit period for frequent defaulters? Are we proactively following up for unpaid invoices?
- Is it time to bid goodbye to an important but frequently defaulting customer?
Once you have firmed up your own—and your team’s—approach to invoicing and handling accounts receivables, you will see a marked difference in your cash inflow.
Don’t hesitate to follow up
Some business owners shy away from sending more than one reminder to clients even when the invoice is way past due date. Get comfortable with sending a gentle yet firm reminder a week before the payment is due and repeat until the client releases payment. At times it may be a simple case of your client being too occupied to process pending invoices, at others they may not have a legitimate reason for the delay.
Whatever the case, you’ll never find out if all you do is quietly check your email every day for good news and don’t reach out to the customer. Remember that you’re only asking for money you’ve earned by doing great work, so reminding the other party to pay up is your responsibility as a prudent entrepreneur who does not want to face a situation where there’s no cash to pay salaries, bills or vendors or to take on a new project.
Use an invoice factoring service
Invoice factoring companies, also known as factors, will buy your accounts receivables and pay you instant cash against your unpaid invoices for a small fee. This helps businesses avoid the perennial problem of insufficient working capital as they receive up to 95% of the invoice value within 24 hours of signing up with a factoring service.
If you’re looking at factoring as a solution to your cash flow woes, remember that the best factoring companies will not charge a sign-up fee, will bill a reasonable factoring fee, will take the time to familiarize you with the process, will not bill hidden fees and charges, and will not force you to sign a long-term contract.