· Establish a Payment Policy for All: The hope is that every customer will pay their bills promptly but there is no way of knowing if that is going to go according to plan. One way to hedge your bets is to establish a payment policy that applies to all business. This could mean asking for a deposit up front before any goods or services transfer hands. If a potential customer has a problem with paying a deposit it could be a red flag towards collecting future payments. This payment policy should also be in writing and cover the final payment schedule whether that is net 10 days or 30 days upon completion. You can have flexibility depending on the customer but your payment policy will work best when everyone agrees to the terms.
· Add A Late Payment Fee: A late payment charge is not something that a customer wants to be hit with but it could prove to be the incentive they need to get their payments in on time. A smart practice is to make sure the customer is well aware of any late payment penalties. Even though you put it in writing, it’s helpful if you or your representatives can go over those terms verbally. A small business can’t afford to alienate customers with hidden fees.
· Develop A Thorough Collections Plan: Your small business collection plan should follow automatic procedures that remain consistent. First, make sure you are re-billing customers who have failed to pay right away. These past due bills can be worded with a “gentle reminder” to bring the bill up to date. You don’t have to apologize for sending out these reminders but you can frame them to put the responsibility on the customer by mentioning things like they might have forgotten the due date. For a single missed payment, it’s always best to remain cordial.
· Repayment Plans: If a customer has a bill that is 60 days or more past due you might want to work with them to set up a payment arrangement. You could help by stopping the late fees and arrange to have payments directly withdrawn from their designated bank accounts.
· Professional Collections: When all else fails, you can turn the customer’s account over to a professional collection agency. They will pursue the matter until it is amicably resolved. This will free up your own accounting department to concentrate on the more reliable customers.