How to Effectively Prevent and Handle Late Payments
In a perfect world, customers would make all invoice payments on time. Unfortunately, this isn't a perfect world and around 39% of invoices are paid late. Thankfully, there are things you can do to help prevent these late payments. Additionally, the way you handle late payments when they do occur needs to be done in a way that will increase customer loyalty rather than destroy it. Ivan Lilov presents the following tips to help you handle those late payments while retaining a customer-friendly attitude.
Communication Is Key
Effective communication is essential to all aspects of a business. If you want to stay on top of all payments, including those paid late, there are a few things you want to do.
- Clearly communicate at every step of the process
- Issue politely-worded warnings as appropriate
- Ensure all information is transmitted without error
For example, let's say you need to send your customer a large PDF file. Due to data transfer restrictions, these large files may be difficult to send through email or other online channels. However, you can compress the PDF file so it's small enough to send, which a compressor tool can help you with. Look for an excellent PDF compressor tool that maintains all your file's structure, including image quality, fonts, and any other relevant file content.
Create Clear Contract Terms
When you develop your business contract, both parties should thoroughly understand what will be expected during your working relationship. In contract development, details are of the utmost importance.
Key terms you'll need to include in your contract are:
- Contract starting and expiration dates
- Who the parties are
- When payments are due (ex. "X days after goods are delivered" or a set day of each month)
- What happens when payments are late
- When, why, and how the contract can be terminated before the expiration date
Writing these terms into your customer contract aligns expectations and keeps all parties on the same page. These terms will also protect you in the unfortunate, but inevitable, event that payments are late.
Make Payments Easy
One big reason customer payments are late is that a quick and simple way to pay isn't available. Add additional payment methods to make this easier. One way to significantly decrease late payments due to complexity is by accepting payments on your company's app.
The app should be simple for customers to use for this to work. Make sure you allow them to add their preferred payment methods and authorize their bank accounts. Using financial API bank account balance software like Plaid, which works with any ACH processor, will enable customers to link their accounts securely, giving them peace of mind that their sensitive information is safe.
Handle Late Payments With Compassion
Sometimes life happens, and your customers fall on unexpectedly difficult times. You should always handle late payments with compassion. Instead of making threats to receive your payments, keep an open conversation with the customer and ask how you could help them make their payments. This will significantly improve your customers' satisfaction and loyalty, which is excellent for your business.
Late Payments Can Be Effectively Prevented and Handled
Late payments can and will happen since this isn't a perfect world. Thankfully, there are ways you can prevent late payments from occurring. Remember, you should always handle late payments compassionately, so it increases customer loyalty rather than destroys it.