As a small business owner, few things are as frustrating as having to chase late payments – especially if it’s causing problems for your cash flow.
With that said, a client may have a good reason for missing their payment deadline and requesting an extension. And sometimes, granting an extension makes sense – perhaps it’s a top client who typically pays on time.
But human error, an issue with your client’s bank account, or the person who signs off on payments being on leave are other ways that payments get delayed.
In any case, your business suffers when clients don’t pay their bills on time – regardless of the reason.
The word “suffer” may sound a bit harsh, but getting paid late hurts cash flow and liquidity – and makes financial planning very challenging.
And if you can rely on timely payments?
You get peace of mind and you can focus on what’s most important: growing your business.
Below, you get 5 tips on how to collect payments on time.
1. Set Clear Payment Expectations
Getting paid on time starts with setting the right expectations.
Clearly include your payment terms on your invoices, and discuss them during client on-boarding.
Mention when you expect the client to pay – for example, within 60 days of receipt of the invoice – and any late payment penalties.
Leave no room for ambiguity and agree on exact terms and invoice schedules.
Pro Tip: Some companies have a set day on which they settle outstanding payments, such as the 15th of the month. During on-boarding, ask about their typical payment schedule so you can send your invoices at a good time for them.
2. Make Paying as Convenient as Possible
In today’s fast-paced world, people expect convenience – everywhere.
If it’s difficult or inconvenient to pay you, there’s a good chance you get paid late. Your clients might think “I’ll do it later” – because it’s difficult or inconvenient – and then forget about it.
Here’s a few ways to make it as convenient as possible for your clients to pay you:
- Send a payment link. With a text-to-pay solution, you can send a text message with a payment link. All the receiver needs to do is click the link, and they will be able to pay seamlessly, from their phone, using their preferred payment method. Easy!
- Offer different payment methods. By offering a variety of payment methods – such as credit cards, bank transfers, checks, etc. – it’s likely you have a given client’s preferred (easy) payment method.
- Send reminders. Use invoicing software or an integrated payments solution that sends automatic payment reminders to your clients via e-mail and/or text message. Include your payment link, payment terms, and payment methods in every communication.
3. Incentivize Upfront Payments
If you run a service business, requesting upfront payments to new clients may rub them the wrong way – especially in an industry where this is not the norm.
But incentivizing existing clients to pay upfront – particularly those who frequently pay late – is worth considering. You could offer a small discount for earlier payments or throw in a freebie on top of your usual service offering.
It’s a win-win, as your client will appreciate the gesture and you get paid faster.
“Rewarding” a client who tends to pay late with a discount might seem counterintuitive, but remember: the higher your percentage of on-time payments, the better your cash flow. Nudging problematic clients in the right direction with a small discount could be worth it.
4. Set Up Recurring Payments
Depending on your business, it could make sense to set up automated recurring payments.
This makes sense for businesses that are membership or subscription-based, but could also work for service businesses with long-term monthly retainer contracts.
The main benefit of recurring payments is that they only require one-off authorization from your customers – then they automatically get charged the agreed amount at a set time interval, such as monthly or quarterly.
This can significantly reduce late payments to your business.
Pro Tip: You can set up recurring payments via the Automated Clearing House (ACH) network. Read our article on ACH payments to learn more.
5. Collect Payments On-the-Go
If you are a contractor and you do a lot of on-site and in-person visits, such as in construction or HVAC, being able to take payments on-the-go can increase your percentage of on-time payments.
Using a virtual payment terminal, you can generate an invoice and allow your clients to pay right away with their preferred payment method.
And if you don’t have an internet connection where you are, Gravity offers offline payment processing solutions so you can take payments any time, anywhere.
You don’t need to purchase any hardware like a credit card terminal to do this – the whole process happens on your phone. You don’t even need a website!
Get Paid On Time with Gravity
Maintaining a healthy cash flow is one of the most important aspects of running your business, and collecting payments on time is fundamental to achieving that.
With Gravity’s merchant services, you get a white glove setup that includes a variety of payment methods – so that you collect more payments on time. We also offer simple funding solutions for your business, so you can cover any short-term funding gaps.
Contact us today to learn more about our payment processing solutions, which we can tailor to your business needs.
