How to Convince Your Customers to Pay on Time

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The best way to save yourself from the stress of collecting debts is by avoiding debt itself.

While avoiding debts from your customers may sound a little too good to be true, it doesn’t have to be.

Here are some of the things you can do on your own to encourage your clients to pay on time

1. Check their credit

An investigation if your client is trustworthy enough and if they’re worthy of your time and effort is a vital step before offering a credit payment.

Always run a credit check before getting into a long-term relationship or one that will have a significant financial impact; however, you can skip this step for small transactions.

Although it might not ensure payment, it can support you in avoiding troublesome clients and customers in the beginning because a credit check shows their payment history, making it easier to identify potential red flags.

Make contact with your potential client’s previous business associates to ensure that they had a good experience and were able to get payment on schedule.


2. Collect payment upfront

Collect their payment on day one and avoid giving credit at all costs.

This strategy is often utilised in manufactured or merchandised products and in services.

Your client will be willing to pay in advance if you do an excellent job. As a demonstration of good faith, if your new client won’t pay in full upfront, negotiate for them to pay half the fee at the start of the job and the other half once it is finished.


3. Send an invoice to your client as soon as possible 

You have to send your client your invoice as quickly as you possibly can if you did grant them credit.

Utilise software like Xero, MYOB, Debtor Daddy, or Debt Chaser to automate your invoices. Your invoices will be sent out immediately as soon as your project is finished or your products have been delivered by automating the process.

Sending out invoices this way is a lot easier and it saves you the time in waiting for your bookkeeper to prepare and organise.


4. Offer a variety of payment methods

Direct deposit is preferred by some clients over cheque, credit card, or online payment methods, while some prefers the latter.

Giving customers a variety of payment choices encourages them to pay you on time. The tiny price you pay to accept credit cards will be less expensive than hiring an attorney or an outside agency if your clients buy things from you.

Allow Visa or Mastercard to handle debt collection so you can focus on running your business, which is what you do best.


5. Offer discounts for early payments

If a consumer pays on time, reward them with a discount.

This could be a proportion of the overall invoice total, which is frequently advantageous to clients financially.

An early payment incentive of 2%, for instance, can persuade a client to pay the invoice sooner.

Even if it doesn’t seem like much, a skilled accountant will prioritise paying this invoice right away, because the old saying is true “every little bit counts”.


6. Include sanctions in your contract

A sanction is vital if they don’t pay on time. If not, you are throwing away free credit.

You and your client must have a written and legal agreement that lays out the terms, deadlines, costs, and other significant details about the transaction.

The penalty clause on the other hand, must be prominently displayed on each contract and invoice.

Since your client does not want to be penalised, having your client sign the contracts helps in ensuring that they will pay on time.


7. Don’t waive the terms of payment

Always abide by the penalty terms you’ve set with your clients.

If your client still doesn’t pay, evaluate whether you actually want or need them as a client or customer.

Remind the client that the payment terms have not altered and the penalties will still apply regardless of other situations. If you do grant a grace period for slow payments, make sure you don’t do so at the detriment of your business. You want to be a fair and considerate business owner, but not jeopardise your future as well.


8. Approach your clients politely

It’s wise to get in touch with your debtor before bringing in the debt collectors.

A kind reminder in this situation can work wonders.

But no matter what, being polite and kind will increase the likelihood that the client will pay.

The best method to start is to just ask them whether they are aware they are behind on their payments via a phone call, email, or letter.

Talking to them politely may also make them more inclined to actually pay you or at least explain their circumstances, which can then help you decide how to pursue your next steps.

9. Maintain good relations

Improving your ability to communicate and comprehend one another’s perspectives is a significant act when you’re in a business relationship.

A strong relationship can offer a method to sort things out and assist both parties, if problems occur.


10. Hire a debt collector

You should outsource a debt issue a professional debt collector, especially if you find yourself spending a lot of time on debt recovery processes. Sometimes all it takes to get an invoice paid is the “third party effect.” In this case, you contract with a third party, such a debt collector, to handle the accounts receivable.


Do you need a debt collection specialist?

JMA Credit has over 50 years of experience in the field of debt collection.

We don’t ask for fees unless we are able to recover debt on your behalf – so there’s no need to worry about added expenses on your end.

We work with small and medium sized businesses right across Australia, so no matter where you are or what you do, we can help you manage your business debts.

Contact us today and find out how JMA Credit Control can help you take control of your finances.

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