The single most important task that every business owner should do is get money in the business. Revenue is the fuel that runs your business and therefore no business should be without.
One thing that could really hurt a business is to not get paid on time. This might not be obvious at. This leads many businesses to fall short of their financial commitments with suppliers and service providers.
The way to solve this business challenge is to put a collection process in place that will improve and automate the tasks of collecting payments. Below are 5 ways you can use to improve payment collection.
- Collect before commencing work
If you’re running a service based business or need to install or develop something before delivering to the client, is a good idea to collect a percentage of the total amount upfront before commencing work, this will produce instant revenue as well as aid in the process of final payment collection.
- Apply discount for prompt payment
A good motivator for prompt payment is discounts. Offer your clients discount if they pay the total invoice amount before the due date. The logic is simple; the client has been offered a discount for a payment he has to make anyways but if done a few days earlier it’ll save him money.
- Apply late fees to invoices
On the other side of the coin, you can apply late fees for late payment. People really don’t like to pay more for things, so the logic is also simple; if the client does not pay in time he will have to pay more for something he could pay less.
- Have a reminder system in place
One thing that works well is having a reminder mechanism in place to remind you when to collect payment from clients. Because basically most clients are not well organized and have too many things going on their business, some don’t even have in house bookkeepers so sometimes the client just needs a little reminding for him to make payments on time. This mechanism can be a calendar like application like Google or Outlook calendar, but if you want a more complete solution that would integrate with other bookkeeping tasks in your business you can take a look at Cashflow’s financial calendar.
- Have a way to collect payments electronically
Waiting for checks to come in the mail feels like 19th century methods to me. By having a way to collect payments online for invoices not only improves payment collection but also requires less overhead from your part. By using a payment method like Paypal or Dowalla you can speed up payment collection.
This is a feature we are integrating into Cashflow, to give you a way to send invoices by email and receive payment instantly from clients without have to follow up. Try Cashflow for free, it takes less than 60 seconds to get started.