In any business, the influx of cash will make or break your chances of success. If you’re constantly paying for supplies and services from your partners and vendors, but you’re not getting paid by your clients, you’re going to end up with a negative balance.
While all companies sometimes struggle with an unbalanced cash flow, smaller companies are more likely to be negatively affected by this issue. No company wants to be labeled as the “bad guy”, constantly pursuing clients for overdue invoices. But companies need to follow a consistent strategy for acquiring payments, or risk destruction.
If your smaller brand is still finding its footing in a competitive industry, the following issues could be why you’re not collecting payments on time.
Your Payment Terms are Unclear
What details do you include when you send an invoice to your customers? Do you just use a basic email template to request a payment? Or are you employing professional invoices, complete with due-by dates and easy-to-understand terms and conditions?
A lot of smaller companies are so keen to rush into relationships with customers that they forget to get their payment terms ironed out first.
Before you start a project with a customer, make sure they’re clear on when you expect to be paid, what kind of payment options you expect, and what the repercussions are for late payment (such as an extra fee).
When sending an invoice for the agreed project, reiterate the payment terms you’ve already agreed with your customer, and give them a specific deadline they need to pay by. If you’re not clear and direct about your payment terms, your customers may assume paying you isn’t a priority, which makes your bill very easy to forget.
You Don’t Understand Your Customer’s Needs
Taking some time to define your payment terms for your customers before you begin working on a project or providing a service can also show you where you’re overlooking your customer’s needs. You may assume, for instance, that every business can pay you via wire transfer, but there may be customers on your list who’d prefer to pay immediately through PayPal.
Some customers prefer to set their payments and forget about them with subscriptions and recurring payments. If this is the case, they may want to set up a direct payment for their service on a monthly basis. There are even customers out there who might prefer to send payments in different currencies.
Getting to know your customers means you can ensure you have the right selection of payment options available for their needs.
As you build a closer connection with them, you can also benefit from more transparency.
For instance, when a customer is in a bad place financially, they will feel more comfortable reaching out to you, requesting a payment holiday, rather than just ignoring invoices or canceling your service entirely.
You’re Not Following Up on Payment Requests
Chances are that the company or individual receiving your invoices is also receiving payment requests from a variety of other brands. If you only send one email requesting payment, and then leave your customers to it, while other brands send repetitive emails on a weekly basis, your customer is more likely to deal with the more persistent company’s bill first. Although you don’t want to risk a valuable relationship with your customer by hounding them with too many messages too quickly, you do need to follow up to ensure you get paid.
You can set up an automated dunning campaign that sends alerts when your customer is coming closer to their payment deadline. There are also services that allow you to send automated emails when a payment fails, or an invoice becomes overdue.
A good dunning email strategy can be an excellent way to prevent late or missed payments, without rubbing your customers the wrong way.
An automated system will allow you to avoid the headaches of trying to figure out which of your customers you need to follow up with each day. You can also design emails that make payment easier for your clients. For instance, you can do that by including a button the clients can click on to make an immediate payment or contact details so they can reach out and ask questions about their options.
Don’t Miss Out on Essential Payments
Every missed payment or the late transaction can derail your business. For small companies, payment issues can make it impossible to grow, compete, and survive in any niche. Learning how to overcome the risk of late payments could be the key to ensuring you can make a difference in your industry. Don’t be one of the many emerging brands failing to collect crucial payments on time.
Ashley Wilson is a content creator, writing about business and tech. She has been known to reference movies in casual conversation and enjoys baking homemade treats for her husband and their two felines, Lady and Gaga. You can get in touch with Ashley via Twitter.