If you grant the standard “payment due net 30 days” you are actually loaning that money at 0% interest. You still have to make payroll, pay rent and utilities, but your client gets a pass? What’s wrong with this picture?

Some small business owners avoid contacting slow pays, fearing it may jeopardize long-term relations with a trusted (and slow) buyer of goods or services, but slow pays cost you money in lots of ways.

Paper invoices, postage, past due remediation, risk – your company takes on risk when it extends credit and gives clients free use of company funds for 30 days, which can quickly turn into 45 days if your company doesn’t aggressively and cordially encourage payment at the time products or services are delivered.

If an important, long-time client calls and asks for extended pay options, of course you’ll accommodate an old friend and long-time repeat buyer – the kind of buyer who forms the foundation of a successful business. However, extending favors to anyone who asks can quickly get you into financial trouble.

Here are some suggestions for getting paid faster, increasing the pace of cash flow through the business, and lowering collection costs. This is an easy money saver as long as you and clients understand expectations.

1. Be totally transparent. If your company’s terms of service are standard, transparency is easy. However, when the contract is 160 pages long, you don’t want to bury critical payment terms in the microscopic fine print at the very end – the stuff nobody reads. Standard terms should be posted where consumers must see them – on the wall, on the menu, in the trifold brochure – you’ll have fewer headaches and lower collection costs when your expectations are crystal clear.

2. Avoid open-ended agreements. If things aren’t working out with a slow pay who’s gumming up business flow, you want to know where the exit is, and you want to be able to cancel the contract without penalty.

3. Encourage remote payment capture. Technology exists today that lets you accept debit and credit cards from your smartphone or tablet, using a simple plug-in device.* Clients enjoy the easy payment option, your payment is made without a trip to the bank, and you don’t have to manage a bunch of paper to process an order. Talk to your business banker about remote payment capture using digital technology to get paid faster and at a much lower cost.

4. Invoice as soon as you get back to the office. If you don’t accept remote, from-the-road payments and rely on mailed paper invoices, don’t wait 30 days before mailing the invoice – even if you are “net 30.” You can invoice anytime, and the sooner the better.

5. How about early payment incentives? Pay immediately and knock off 5% of the bill – the 5% you won’t have to spend on invoicing and collecting payments.

6. It shouldn’t be a surprise that you charge interest on late pays. It should be in bold letters on the work order, the invoice or other request for payment. Clients and customers hate surprises – especially surprises that cost them money. Customer good will goes a long way to simplifying collections.

7. Reminders that jog clients’ memories. They don’t have to be demanding or threatening. In fact, they shouldn’t be. Make a personal, friendly phone call or send a personal email. Act as though you’re assuming that they have merely forgotten about paying, or been too busy. Although reminders take time (and time is money) they are usually worth the effort.

8. All jobs – but especially long-term jobs – should require a hefty down payment. If you deliver $10K of widgets on a handshake, there’s no incentive for that client to pay you promptly. He already has the goods.

9. Have a plan in place. Don’t wait until you’re confronted with a pile of receivables. Develop a standardized system for handling receivables that creates urgency and reciprocity with customers and clients. Your business works weekends when needed; that customer can show gratitude and appreciation with a quick payment.

10. Please and thank you: they’re still the magic words. They were the magic words when you were 10 years old, and they’re still the magic words in business. Invoices should be polite, short on fine print, and easy to pay. And payments should be followed up with a confirmation of receipt and a great big “THANK YOU” for being a good customer.

If you don’t have at least several ways to accept payments, you make it harder to be paid. Contact your Nevada State Bank business professional and get set up to help you get paid faster and easier, at competitive costs.

Merchant Services are provided by First Data Merchant Services LLC. To find out more about this option, contact our Merchant Services Department.

 

*Merchant Services products and services are provided by First Data Merchant Services LLC and not by Nevada State Bank, a division of ZB, N.A. All trademarks, service marks and trade names referenced in this material are the property of their respective owners.

 

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.