Here's how small business owners can ensure they get paid on time
For a company that is still finding its footing, cash-flow problems can be a real problem. Startups need to be exceptionally careful about handling their finance, if they wish to see themselves above the curve. While client acquisition is important, getting paid on time is integral to the business' sustenance. If you aren't careful about collecting your due on time, cash-flow problems will engulf your business.
Here's a list of some of the best practices that will ensure you get paid on time so you don't have to worry about cash-flow anymore.
Get a payment policy in place
One of the easiest ways to ensure that your clients and customers pay on time is by having a well-drafted credit and payment policy in place. Through this policy, you can make sure that the parties involved understand what your expectations and rules of engagement are. This policy is vital for every business, no matter how big or small the scale of operation is. If your business doesn't have a payment policy already, it would be frugal to get one as soon possible.
Establish a credit control function
Before you start operations in full swing, spend some time establishing a credit control and collections function in your startup. To put it simply, you need to build an easier and hassle-free process for customers to transact pending payments. You can either hire an in-house team or outsource this job to an agency. The individuals in charge will remind clients and customers about payments they need to make and they'll decide when it's time to escalate the matter and look at legal options.
Simplify payment methods
Don't be too picky about how you want your customers and clients to pay. Try to provide convenient options, so they don't have a reason to blame you for their dues. Whether it is by card, debit order, NEFT or cash payments, give your customers a variety of payment options to choose from. You can also use a technology solution which will allow you to issue statements or invoices with multiple payment options. This way, customers can pay on receiving the invoice instead of having to log in to online banking.
Add penalties or interest for late payments
Have a system in place to manage invoices, emails and call recordings. The paper trail you maintain can help your case if things go south. Let your clients know in advance that you'll be adding interest to or penalizing payments that come in late. The sight of additional expense usually speeds things up and keeps clients in check when it comes to overdue payments.
If you're a small business, you should be careful about not giving credit to individual customers. Make sure you check a company's credit score before granting them 30 days to pay. Use the above mentioned tactics to ensure you get paid on time by your clients and to combat problems relating to cash-flow.