Managing your cash flow is easily one of the most important things that you can do to ensure your company's success. Doing it is not as easy as it would seem though. This is especially the case if you have customers who never seem to pay on time. Studies have shown that accommodating late payments can easily result in cash flow issues. In other words, it doesn’t matter how well you manage your cash flow because if you are not getting paid quickly, then you are at a huge risk of running out of money.
Prepare a Written Agreement
It doesn’t matter whether you have just signed a brand-new customer or whether you are renewing one of your contracts because if you have a written agreement between the two of you then you need to discuss the payment terms, the deadlines and various other details. You need to talk about everything so that you can ensure that there is no misunderstanding in the future. It’s a good idea for you to emphasize the terms that you have agreed on so that you can deliver properly. If you state that all payments are due within 20 days, then this will make it much easier for your customers to know what their responsibilities are. If you can, send out the written agreement in a paper format. Use envelopes and post them if that works for you.
Stricter Payment Terms
Offering very flexible payment terms is somewhat of a smart move if you want to keep your customers happy. That being said, there are customers who are stubborn and disorganized. They may well choose to not pay you on time, regardless of how flexible the terms you have are. It’s advisable that you try and set a strict deadline with customers like this. If you can negotiate a short payment time, then this is even better. This will stop your company from having any cash flow issues.
Follow A Schedule
It may be that you need to tighten up your payment terms or that you need to be stricter with your payment schedule. You may choose to send your invoices on the 1st and the 15th of every month for example. If you do this, then make sure that you stick to these dates. This will help you to ensure that your customer’s cash flow issues don’t impact you and it will also train them to make payments on a regular basis. Make sure that you know the dates that your customers process the payments and make sure that you create the deadlines around these dates. If you can do this, then you can easily come out on top.
Ask for an Upfront Payment
This will work best for new customers or for those who have very big orders. You need to request that they pay half of the bill when they place their order and then the other half when you are able to deliver the product. When you do this, you are essentially guaranteeing that you will be paid in part before the due date.
