Extending credit is aggravating. It strangles cash flow and your ability to pay vendors on time. Who among us hasn’t studied A/R reports and said the words “we’re not a bank”?
Keep the credit line open and certain clients will continue to abuse it. But if you shut it down you risk losing the client’s business. Here are some proven ideas that may keep your blood pressure under control.
1. Set up Multiple Payment Channels
Make bill payments easier for customers. Besides cash & check, accept credit card payments and electronic funds transfer (EFT). Consider auto-pay. Add an online payment form to your website.
2. Automate Billing Processes
Provide your delivery drivers or service techs with a card swiper. They are typically free from your bank and allow the option to quickly pay or offer a discount for on-site payment.
3. Stick to the Plan
Written procedures should be consistently applied to each customer. This avoids a situation where some customers to bend the rules. Conventional “net 30 days” will accommodate those that pay bills on a monthly basis. If a bill remains outstanding after 30 days, proceed with alternate measures of collection. Typically A/R gets grouped in 30-day buckets and labeled as 30, 60, or 90 days past due and business owners may use different collection methods. Letters and emails provide a documentation trail but may be easy to ignore. Phone calls are more personable and may yield a response or, at least, the negotiation of a payment plan.
4. Hiring Outside Assistance; it’s time.
If a company struggles to pay you, they likely have a cash flow problem of their own. Make your terms clear up-front. When payment promises are broken, it may be time to hire a collection agency. By removing your team from the collections process, they are able to focus on growing your business.