Business Vehicle

Payments: How to get what you are owed

Learn how to foster good business relationships without losing out on payments.
Latest posts by Veronika Tondon (see all)

How Long Should You Wait to Follow-Up With Clients on Payments?

The payment process can be a stressful one for any entrepreneur. This is true for both products and services. The capital invested in business debtors must be controlled for attaining better return and stability in business. A business owner usually struggles between getting paid on time and retaining a large number of profitable clients. A healthy balance has to be maintained between generating more business and receiving on-time payments. A reasonable number of profitable clients is essential for running a profitable business. Bad debts on the other hand can adversely affect cash flow and payment cycles.

Late payments may either cause interest losses or unhappy vendors. Vendors may charge a higher price if not paid on time. This may adversely affect the profitability of the company.

When To Follow Up For Payments?

Effectively following up for client payments, is the key to getting paid in a timely manner. Before strategising follow ups, business owners must have a payment policy in place. This should be mentioned on all the invoices being sent out.  The terms and due dates can be different for different clients.  The credit period may vary from industry to industry. This can range from 7 days to 60 days.

The payment history of every client must be analysed carefully. If a client pays up on time, then there is no need to follow up or ask for payments. These type of clients will either pay before or on the due date. Such clients should be offered the best possible discounts. Extra effort must be made to strengthen ties with these clients. If for some reason, a good client does not pay up on time, it should not worry the business owner at all. A gentle reminder mail must be sent to this client informing that the payment is due and pending.  If the response in this case is prompt, then there is no need for a follow up call. But, in case there is no reply to the reminder mail, up until 2 days, a phone call follow up is required to find out the reason for the delayed payment.  One can surely expect the payment to be cleared within 2 working days of this follow-up.

In case a client has a poor payment record, the business owner should be more vigilant and proactive about payment follow-ups. This client will give a higher profit margin for sure, but payments from such clients should never be ignored. The credit period should be decided in advance and must be on the conservative side. A late fee must be added to the invoice using an online software like Invoicera. This should be a small percentage of the total amount (could be 5-10%). Payment reminders must be set in advance so that automatic e-mails are sent out to the client one day before the due date, on the due date and afterwards as well. Cash discounts and timely payment rewards must be offered to such clients through payment follow-ups on the due date of the invoice. Regular follow ups by the sales team are important to get timely payments from such clients.

Late paying clients must not be sold goods and services in large quantities. They should be offered more, only after their existing dues are cleared.

In case a late paying client has not cleared dues for more than 2 months after the due date, an appropriate collection agency must be hired to collect payments. if the payments are still not cleared, then appropriate legal action must be taken against the client.

Training Of Sales Personnel

Following up for client payments is the responsibility of sales managers and account managers in the organisation. These individuals must be provided proper training for staying touch with the clients and follow up for payments at the right time. They should know how to foster good business relationships without losing out on payments.

Following up for payments, on time, is an art and should be implemented strategically for better results and timely payments.

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