The Mercury: Tips for smalls businesses to get their customers to pay promptly
Durban – Small companies write-off as much as 40% of late payments as bad debt and receive payments, on average, 101 days after the 30-day target, according to a survey by the Small Business Institute.
Similarly, Sage’s research shows that more than one in 10 are paid late.
Viresh Harduth, the vice-president of small business, Sage Africa and Middle East, offers tips that entrepreneurs can implement to encourage clients to pay promptly:
Set clear payment terms and conditions: When you enter into a relationship with a client, raise the payment terms towards the end of the negotiation and include them in the contract or your terms and conditions. Reiterate your payment terms on a prominent place on your invoice template.
Incentives for prompt payment: Offering a small discount for payment within 30 days or on presentation of the invoice can incentivise your customers to pay quickly. Positioning it as an incentive or discount for early payment may work better for a small business than threatening penalties and interest for late payment.
Vet clients before offering a line of credit: Do your due diligence before offering a new client special payment terms. Ask around to find out if they are reliable payers or get a business credit report from one of the credit bureaus. Don’t be shy to ask for a deposit if you’re not 100% sure of a potential client’s financial health, or if you will need to incur costs to complete the contract with them.
Provide easy payment options: Make it easy for customers to pay you using the payment channel of their choice – bank transfer, debit or credit card, or cash. Should you find yourself having to chase the payment, any awkward conversations are lessened if you can demonstrate how you’ve tried hard to make it as easy as possible for your client or customer to make their payment.
Analyse your customer base: If there are customers who are constantly late in paying, consider insisting that they pay cash on delivery.
Invoice promptly every month: If you’re slow or haphazard in your billing, customers might feel you are relaxed about when you get paid. Plus, if you’re dealing with a corporate client, missing the cut-off date for their monthly payment cycle could delay your payment by 30 days or more. With good accounting software, you’ll be able to manage your invoices, view your business health, stay on top of payments and your cash flow.
Understand your customers’ payment cycles: When dealing with consumers, it’s often preferable to work cash on demand or ask for a deposit before ordering a product or starting work. If you must allow your customers a line of credit, be consistent and predictable about when you bill.
by The Mercury – https://www.iol.co.za/mercury/network/tips-for-smalls-businesses-to-get-their-customers-to-pay-promptly-35732271