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Getting customers to pay on a timely basis
Some businesses have added a clause to their invoicing methods and inform the customer up front of a penalty for late payments or a reward for timely payments. The early payment discount plan is that you will knock of a certain portion of the total amount due if you receive payment within 5-10 days after the date of the invoice.
Some companies approach their clients directly at the time of purchase and ask for credit card information instead of purchase order or invoiced payments. If you have ever called in to pledge to St. Jude Children's Research Hospital, the phone agent will ask you for a credit or debit card over the phone and explain that using a credit card will actually put more money to work now and save on bank expenses. This is a great strategy as they are able to obtain their money today instead of in 30 days or even later. Place a late payment clause on your invoices. Inform your customers up front of the allotted time they have to pay without incurring a penalty. A common practice used is to inform them that after so many days, their invoice will be turned over to a collection agency that will make the customer responsible for all attorney's fees, court costs, and related expenses if the invoice is not paid in a timely manner. Another preventative measure you can take is to have good cash-flow management. If you are still having problems collecting on past due invoices, you should consider outsourcing your collections to another company. A popular method used by several companies is factoring. Factoring is the process of selling your accounts receivable invoices to a third party who then is in charge of collecting on the invoice. The agents in charge of collecting are called factors You should consider factoring when you notice your cash flow starting to decrease and your past due invoices are piling up. Factoring will cover the costs to pay wages and pay your creditors when you do not have the income to provide for these essential things. Here are a few reasons why you should consider factoring:
One of the great things about factoring is that it does not tie up assets outside the business and does not involve repayment of debt at some future point in time. Factoring is a great way to get your business back on track and generate positive cash flow again.
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