How to get customers to pay on time

TRAIN your customers not to get into bad habits, writes Nhada Larkin.

TRAINING your customers early is the key to getting bills paid on time, but there needs to be a plan of action for the times when invoices go unpaid.

William Buck Chartered Accountants and Advisors business advisory director Graham Spring says that whenever you take on a new customer you need to set your expectations upfront and clearly about credit terms.

“Business is all about relationships and setting the expectations about payment terms should be part of the process at the start of that relationship,” Spring says.

“You should prepare and send an invoice for the service or product as soon as possible after delivery, preferably at the same time, while it is fresh in the customer’s mind.

“Training your customers early is the key to developing good habits.”

Spring says when existing customers start falling into the habit of paying late, you need to break the cycle and get them back on track.

“This could involve a simple phone call to point out that there is a trend developing of them breaching their payment days and asking them politely to rein them back in,” he says.

“You may also consider offering early payment discounts to customers as this may encourage good habits to develop.

“Those good habits of timely payments can significantly impact the business’s cash flow. In business, cash is king — the longer you let your debtor payments blow out, the weaker your cash flow will be.”

Spring says many small and medium-sized businesses have difficulty getting customers to pay on time because there is an expectation that you should grant customers credit terms.

“Unless you are vigilant in enforcing those terms people will always take advantage and push them out,” he says.

“The secret to keeping your cash flow strong is to match your debtor days to your creditor days to ensure you get paid before you have to pay your suppliers.

“Many businesses we work with are surprised at the additional cash flow they could generate if they simply reduced the number of days that their debtors were outstanding.”

Scott Grigg, the managing director of consultancy firm Chamonix IT Management Consultants, says getting bills paid on time is all about education — of both the business and the customer.

“It’s about making it clear to them (customers) what our trading terms are and then consistent reinforcement so they know if they slip over the 30 days they can expect a call from us,” Grigg says.

“And there’s also education on our side of the fence — understanding the processes our customers employ to get invoices through.

“We need to know their processes so we are fitting in with that.”

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