If not handled effectively, late payments can influence your company’s ability to trade, it could prevent you from being able to pay your suppliers or staff on time, and it could force you to rely on bank overdrafts to make essential payments like electrical bills, rent, etc.
Besides its effects on your business, late payments also take a highly emotional toll on business owners and CEO’s, and can lead to anxiety, increased stress, depression, and other serious mental and physical health issues.
Luckily, there are certain measures you can take, and regulations you can implement, to protect your company from some of the effects of overdue payments, and to reduce the amount of outstanding payments in future (Source: https://www.cfocentre.com/za/).
Some tips for ending late payment issues:
- Do research on prospective clients
Before you extend credit facilities to a new client, make sure that you conduct thorough research on the company. Do a credit check, and try to determine whether the company has a track record of paying on time.
- Offer different payment options
By offering different payment options, such as PayPal, you provide clients with different ways of paying you – this is especially useful for foreign clients.
- Send invoices in advance
When an invoice is ready, send it. An invoice should be rendered and sent to your customer as soon as the work commissioned has been completed.
- Agree to the payment terms
When signing a business contract with your client, let them sign or agree to specific terms and conditions when it comes to paying invoices. Include these payment terms and conditions on every invoice.
- Follow through on late payments
Follow up on late fees and overdue payments, and agree a payment term with the client.
- Keep to a monthly schedule
Sending your invoices on the same date every month will let your clients settle into a ‘payment routine,’ and they will know when they can expect invoices from you.
- Review/track your invoices
To keep up with your invoices and to be notified of late payments, invest in an invoice tracking system. If a payment is overdue, you will be notified.
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