Dealing with late payments
Everything about late payments is a nightmare; and for that reason, many business owners put off dealing with them until they absolutely need to. Now you need to. While some businesses flourished during the pandemic many others struggled with a significant decrease in cash flow and an uptick in late payments. As businesses struggled; customers suffered financial challenges as well. Closed businesses, layoffs, furloughs, earthquakes, fires, and social unrest with a host of other issues have been challenging traditional business practices including payments. To help you navigate these uncertain currents, consider these hacks to reduce and mitigate late payments:
Make it easy to pay
Sometimes late payments can be miscommunication. They didn’t receive the invoice or notification, or they haven’t seen it. With many offices closed or operating with limited staff, imagine the piles of unopened envelopes or emails. Other times it could be that given the current uncertainty, the customer doesn’t understand their payment options. An excellent first step is to examine your payment options: do you accept cash, eCheck, all major credit card brands, and ACH? If not, you should. A reliable payment processing company can make handling all these transactions easy and affordable.
Use automated options
While it may not be a cure, making it easy for your customers to pay is the best practice now and in the future. If your business only accepts in-person payments, you should consider an online hosted payment page or lightbox payment option. Payment processing companies like IntelliPay make adding a hosted online payment page or lightbox option quick and easy to add to any website. Paying by phone, text, or email are other options to consider and all options are easy to integrate into existing back-end systems that offer the side benefit of streamlining and simplifying your payment accounting.
It pays to communicate
Working with and communicating with your customers about their payment options can go a long way in speeding up payments and reducing your accounts receivable. Start your communication positively and that you appreciate their business and are aware of their needs. Remind them of your payment options and methods to pay. Communicate with your customers before their payments become overdue and offer mutually beneficial solutions. Automated installment and recurring payments are two options that business owners can provide to their customers experiencing financial challenges. An integrated payment solution like IntelliPay makes it easy to accept and account for these types of payments.
Use your payment history
It is vital as a business owner that you have detailed records outlining a customer’s payment history. Your accounting system should generate statements of cash flows you can review to monitor receivables and even allow for a deeper dive into aging by customer. Getting out ahead of the curve before things go beyond thirty days will help reduce your exposure and give you a competitive advantage over less payment savvy competitors. Offer your customers a discount for paying early or for the full amount due. Incentives can range from a small deduction from their invoice to a prepaid card. These are small costs to pay relative to the costs of collection and writing off bad debt.
You may also want to consider accepting payment at the time of service or receiving a substantial down payment. Accepting these payments is not as daunting as it seems since you could use mobile apps or payment by phone to take credit card information upfront. While full payment upfront may not always be possible, it should be an option since it eliminates the need to send bills and go through a collection process.
Possibility of penalties
Penalties can be a carrot and a stick. Customers are more likely to pay on time when they consider the cost of the penalty; and when combined with a payment incentive, the cost savings. If you decide to charge penalties for late payments, they need to be part of your overall plan. Penalties need to be charged uniformly and disclosed at the time of sale. Your sales documents, invoices, billing-related correspondence, and online payment pages need to explain your penalties for late payments clearly. Penalties could be a simple $10 a week charge for every week late or a percentage of the outstanding balance. There is a delicate balance here. You want to protect your business and incentivize your customer to pay while avoiding the perception that you are profiting from late payments.
Manage a monthly budget
Maintaining healthy and consistent cash flow is essential for your business. Understanding and protecting your cash flow is critical for any business owner. Best practice suggests that you include a monthly budget allowance to cover late payments.
Make a plan because you are here to stay
There is no way around it; late payments are your reality. You and your staff need to be on the same page, and we recommend a well-defined plan for handling late payments. Your plan should include your payment policies, payment options, the strategies for offering payment options, suggested talking points, and when escalation is required. Your plan should also include when and how to send a customer to collections. Train your staff in all areas of payment acceptance, including late payments. All involved must keep their cool and act professionally, especially now when late payments are a financial burden and an emotional one.
Late payments are never pleasant, but a reality for every business. Having a well thought out plan, plus a variety of easy to use and automated payment options can help mitigate the risk and reduce the number of late payments your business experiences. IntelliPay offers an all-in-one payment gateway solution that allows merchants to accept any payment from any device at any time. Accept credit card, text, email, phone, and online payments 24/7 and manage it all from a single console. In addition to traditional payment processing, we offer payment options where the cost of processing a payment card is shifted to the cardholder, reducing or eliminating your payment processing expenses. Our Google cloud-based offers 99.95% reliability, unlimited scalability, bank-grade encryption, and PCI DSS level 1 security for all transactions. For more information, your questions answered, and schedule a free demonstration please contact sales at 855-872-6632 option 3, or email@example.com.