Tips to avoid late payments

After your online company registration has gone through, it is said that one of the biggest headaches of businessmen comes in the form of late payments. Delinquent suppliers and customers who habitually delay payments for the products or services they received from your company, or have to be continually followed up to pay is bad business. It is taxing on the company’s resources, it jeopardises the company’s cash flow, and it can negatively affect morale.

Start-up entrepreneurs and businessmen should institute certain policies to lessen, if not totally eliminate, this habit of late payments.

Here are some tips to help you in managing late payments:

1. Always remember to check your new customers’ creditworthiness before drawing and signing a contract with them. One effective way to do this is to ask for the services of a credit-checking agency. But credit-checking should not be limited to new customers though – it is good practice to periodically check the credit worthiness of existing customers too to lessen your exposure to risk.
2. You should consider refusing the orders or obtaining downpayments if a client has a poor payment record. You can also stop the delivery of supplies to customers who are not paying. Make it their “responsibility” and liability if they want additional supplies.
3. Draw clearly written contracts that also contain the terms and conditions. The usual business practice is to expect payment within 30 days – but whatever terms you and your customer agree upon, make sure that the payment period is clearly indicated.
4. Always keep close contact with your customers and always follow up on unpaid invoices.
5. In case a late payment occurs, always attempt to politely obtain a settlement for the overdue invoices before taking any further actions.
6. If the problem still persists, you can consider putting an interest on the overdue amount, or – in the worst cases – threaten the delinquent client with legal action. It would be a good idea to also stipulate these actions on delinquent payments on your contract.
7. One way to discourage late payments and encourage clients to pay earlier is to offer early payment discounts.
8. Try to use other avenues to make payments, like the internet, to make payments easier for your clients. Four out of five companies have indicated that they now accept payments by electronic transfer from their business clients. According to two-thirds of the companies interviewed – they have found that making payment options reduces the incidence of late payments.
9. You can consider factoring your invoices if payment collection is still an ongoing problem and is already affecting the liquidity of your business.
10. Always thank and show your appreciation to the customers who pay on time.
11. Think about offering early payment discounts.
12. Make use of the internet for payment. Four out of five companies now accept payment by electronic transfer from their business customers. Two-thirds of these find it reduces late payment.
13. Consider factoring your invoices if collection is an ongoing problem and is affecting the liquidity of the company.
14. Remember to thank those customers who do pay on time.

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