ARE YOU AFRAID OF LATE PAYMENTS AGAINST YOUR INVOICES?
Late payments suck, right? Who doesn’t know that?
The mental image of you having to physically chase a customer to pay against your e-invoice is definitely not one that brings a smile to your face.
It is possible that such a picture made a low hiss escape between your lips as you clenched your fist.
Cashflow understands just how frustrating it can be to get into such a tight corner. Very annoying, really, it is.
It is just because Cashflow cares about you that this piece was written in a bid to save you the emotional stress of being in such a situation. Don’t go away.
Now that Cashflow has made clear the good intentions of this blog post, you can sit back with a cup of hot cocoa as you read the simple instructions on how to prevent such a scenario.
First of all, do note that most customers actually want to pay you on time. Late payments are just as embarrassing for the customer as they are frustrating for you.
The belief that most customers actually want to pay you on time will go a long way in helping you treat defaulters with courtesy. Take note of it; it’s important.
With this in mind, you can carefully communicate to your customer before the contract is mutually agreed-upon by both of you when you want your invoice to be paid.
If this can be done in person, without a third party who may not convey the message as well as you’d love to, the better for both of you.
When the contract has been executed to the satisfaction of your customer, you can prepare your invoice with the terms agreed upon by both of you.
Below are a few of such terms:
Payable on Receipt: Payable on receipt means that the payment is due at the time of sending out the e-invoice.
Net 30: Net 30 is a very common payment term that requires customers to pay their vendor within 30 calendar days. You can choose another number of calendar days within which your e-invoice is to be paid against. When this happens, you can write terms like net 15, 21, 60 or 90 days on your invoice.
2/10 Net 30: This payment term is similar to net 30 but offers customers a bonus. The 2/10 means that the vendor offers a 2% discount to customers who pay within 10 days of receiving the invoice. If you wish to give your customer another type of discount, you can write 5/5 Net 30. Or 5/10 Net 15, 3/7 Net 30 etc.
What action do I take if my customer defaults?
As unpleasant as defaults on payments are, they sometimes happen. This is why it helps to have a backup plan, a BATNA (Best Alternative To a Negotiated Agreement) at hand.
Such backup plans include:
Automated Reminders
These come in handy when the payment period has elapsed. They also prevent the likelihood of customers actually not seeing your e-invoice delivered to their email addresses.
In the automated reminder, a polite wording thanking your customer for his patronage and requesting payment can be put.
As courtesy is key in business, a customer who is otherwise stressed out and likely to feel irritated by your automated reminder will be much more favourably disposed to pay against your invoice.
Late Payment Terms
This is to be used as a last resort if the customer has still not paid against your e-invoice after being sent automated reminders.
However, late payment terms can only be used if you had communicated this to your customer before execution of the contract.
To do this, simply write in the next automated reminder the late payment fee for having to follow up on payment of your e-invoice without success.
It won’t hurt to also email your customer with the late payment terms as the subject of the email. Hopefully, this will jolt the customer into paying against your e-invoice.
That’s all Cashflow has to tell you about preventing and rectifying late payments. Hopefully, your customers will err on the side of caution and pay you on time, so there will be no need to send out an automated reminder!
