“Your earning ability today is largely dependent upon your knowledge, skill and your ability to combine that knowledge and skill in such a way that you contribute value for which customers are going to pay.” – Brian Tracy
Cold hard cash flow is extremely essential today, especially when running a business. A healthy cash flow enables a company to buy goods and services, pay its employees, and a steady cash flow serves other such purposes. In contrast, if cash flow were to become scarce and dry up, even the best of companies could face the risk of a total breakdown. Several businesses continue to lurk in the darkness of uncertainty because of unsteady cash flow, much of which would be late payments by customers. It becomes imperative for a company to put in place simple yet effective strategies for getting customers to pay on time, to ensure a stable and foreseeable cash flow.
In an ideal world, getting customers to pay on time would not be an issue – everything would work accurately and precisely – customers would receive the best service, and companies would receive payment on time. However, this is probably a utopian situation, and most often, this does not happen. Is getting customers to pay on time an issue with your company too, or has your company been able to fix this tricky situation? Although, receiving timely payments from customers is the right of a business, especially if the company may have done whatever required to assist its customers, there are times when payments straggle. Offering rewards, discounts, or incentives for getting customers to pay on time, may be required. A company must however, keep such ‘lures’ in check – aligned with the benefit of its own business. While the incentives must be appealing and encouraging enough for getting customers to pay on time, they must not raise the expenses beyond control for a company.
Adding a penalty clause for late payments is another for getting customers to pay on time. Some customers do not respond to encouragement as they do to penalties – making a penalty clause standard for all service agreements will ensure that customers understand your company’s unwillingness to accept shoddy treatment. Keep a balance though – the penalty must be large to ensure timely payments, but not so huge as to scare customers away. In addition, a company must make it convenient for customers to pay on time. It would be a good idea to ask customers what payment terms, methods, and timelines would be most convenient for them, and then settle on what would be feasible to the customer and the company. Being flexible in relationships with customers is part of top class customer service.
This point seems obvious, and yet strangely some companies forget that technology can be the best friend for their business. Use technology to automate the whole payment process. Online invoicing, or sending invoices through email are much better options than paper invoices, since they are quicker, save paper, and stay on the system as a record. Provide customers the option of paying online too, with a system that would send reminders to the customer to pay, with reminders shutting off once the system indicates payment. Automated and relentless follow-up – now this is certainly one sure-shot way of getting customers to pay on time.
Aligning closely with the points above, is the method of switching to automatic / recurring billing. A set pattern and date of invoicing and billing will ensure that both your company and the customers would not need to worry about payment being made on time. The system would ensure that payment is transferred automatically to the company from the customer’s account, without human intervention.
A number of companies when working with new customers, ask for complete or part upfront payment – this way the company is covered and would enter a customer project feeling safe and confident. The customer too, would remain confident that work would get done efficiently and in a timely manner, since a company would want future business and the remaining payment.
Getting customers to pay on time is not only about automated processes and methods of payment – it is about building and nurturing strong bonds and emotional connections with customers. Understanding the customer’s needs and expectations, whilst expressing the same for the company, will ensure that both sides understand the limitations, strengths, and challenges of the other, making for a mutually beneficial relationship. Over time, as mutual respect and trust builds, customers would be mindful about paying on time, and if there were some inadvertent delays, it would be easy to call up the customer to remind about payment, without any risk of misunderstanding or ire.
Working on a monthly recurring retainer is a lot simpler, and a better way of getting customers to pay on time. This makes it easier for the customers too. They would be able to continue with a company long-term, ease of making payment once a month, and would encourage the customer to provide more work to the company. This works out well for a company too – it would get assurance of long-term work, regular and timely payment, and several opportunities to build a stronger and more trustworthy relationship with the customer. Whatever is agreed to, must be done so at the start of any arrangements, even if the process takes a bit longer. Once everyone reaches the most feasible agreement, there should be little room to move away from the basic service level agreement clauses – both service related from the company and payment timelines for customers.
It must be understood that in a customer-company relationship the interests of both parties are equally important. If a customer seems to be a regular defaulter on payment, it is perfectly acceptable to withhold work and not complete the project until the agreed payment be made. While customers are invaluable, they too need a company to make their business run and serve their own customers well and hence must not take the company and the association for granted. Paying on time is the duty and responsibility of customers and regular defaulters must be made aware and shown consequences of not upholding their part of the association.
The fact is that despite agreements and clauses, there could still be issues with getting customers to pay on time, and it is acceptable to consistently remind customers of the same. Customers who care about the relationship would pay on time, so as not to jeopardize the relationship, and those that consistently fail to pay when due, should face a penalty or terminating such a relationship would be better.
Most companies avoid going down the legal route – since it is time-consuming, and could send a wrong message to others in the market. It creates a high degree of hatred with a customer, while making others wary of doing business with the company. This seems unfair, especially if the customer would be the one to mess up the relationship. Instead, using a collections agency would be a shorter and less publicized route – your company would get its dues, while maintaining privacy over its customer relationships.
Getting customers to pay on time is a genuine and serious problem that several companies continue to face – a dent in the cash flow causes disruptions in business. When business is interrupted, it becomes difficult for a company to provide high quality products and a high level of customer service, which in turn become reasons for other customers (and payment defaulters) to complain, and maybe even leave the association with a company. As a customer, if you a customer who does not pay on time, the repercussions of reduced cash flow in the partner company would reach you too. For companies, it would make sense to have tight and well-written agreements in place, with processes in place to send timely invoices and payment schedules. Getting customers to pay on time should not be a struggle each month – save the time and effort to get more work done for existing customers, and get new work from additional ones.
