Healthy cash flow is important to any company, but small and family owned businesses are particularly vulnerable when invoices don’t get paid. With limited cash reserves, small businesses can run into serious financial problems if customers don’t pay quickly. If you run a small business, it’s important that you do as much as possible to make sure that your clients pay their invoices promptly.  Save time and stress, and adopt the following financial controls.

1. Clearly state your payment terms up front

Make sure that your customers always know and understand the payment terms that they need to work to. Display the information clearly on your invoices, and on any written quotes or estimates that you give. Add this information to the business terms and conditions on your website, and in any written contracts that you draw up. Even if you are only working from a verbal agreement, it’s still vital to talk about the need for prompt payment. Many people pay invoices late because they thought they had a lot more time to make payment, so it’s vital that you produce the document as early as possible.

2. Make courtesy calls to customers

Invoices don’t always reach their destination. The postal service isn’t infallible, and it’s easy to miss or delete emails. Each time you send an invoice, make a courtesy call to the client. Check that he or she was happy with the product or service, and then confirm that the invoice is now ready to pay. In many cases, happy customers will appreciate your time, and will probably make payment on the phone with you. Invest a few minutes to talk to your customers, and you could save yourself hours of effort later on.

3. Get to know the right decision-makers

Successful small business owners know that good relationships are extremely important. For your regular customers, get to know the people who control the finances, so you know who to talk to if there are problems. It’s easier to deal with issues of late payments or missing invoices when you can talk to somebody you know well. If a payment is late, don’t start sending harsh letters and demands straight away. Go and meet your contact in person, and bring up the matter over a cup of coffee.

4. Send regular statements of account

Many of your customers will buy your products or services monthly, which means that their outstanding balance will grow if they don’t pay an invoice. Send out monthly statements, showing payments received, goods/services supplied and the amount outstanding. This is a good reminder of what customers owe, and is also useful for those clients who do not keep proper records of their transactions. For customers with an outstanding balance, attach a cover letter, which outlines your payment terms and requests immediate payment.

5. Online Payments

If customers are having trouble remembering to present you with a cheque in person or by mail, an alternative method is to encourage them to pay online. Many companies use this method, as it is both easy and efficient.   Using an online invoicing system such at PayPal or FreshBooks will not only ensure that you are receiving your payments on time and in full, but it also makes the process easier for your customer. They won’t have to worry about forgetting to make a payment or drafting a cheque.

6. Make it difficult to ignore you

Small business owners can benefit from building strong community relationships. A small business association or community group is a great way to reach out to new and existing customers. These groups also give owners the opportunity to remind customers to pay invoices, particularly if those customers are like-minded business leaders. Within a small community, reputation is very important. Neither customers nor fellow business owners will want to get a reputation for not paying their bills because this can soon cause them problems. Stay visible in the community, and make it clear to non-paying customers that you aren’t going away. A lot of people will pay up to avoid any embarrassment, which is exactly what you want.

Prompt payment is extremely important to small and family owned businesses, and it’s vital that customers pay their invoices quickly. If you’re having problems collecting payments each month, think about the different ways that you can make it difficult for customers to avoid paying you.

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