Even the best companies have customers who fail to pay on time. As we all face the upcoming challenges in the face of economic uncertainty in the wake of Covid-19. Depending on your accounts receivable collection process and management, however, you may encounter these late-paying customers more frequently than others in your industry.
While it’s impossible to completely avoid late-paying customers—there’s always one bad apple in the bunch—think about how you can minimize the number of customers who miss their due dates on a regular basis. There are a few things you may be doing to encourage your customers to let the bill slide a little longer.
1. Single Payment Method
Do you ask your customers to mail you a check or stop by your office to pay in cash? If you accept only one method of payment, you’re doing your company a disservice. Your customers are busy people too; they might forget to write or mail that check, or they may not have time to swing by your office.
If you only offer a single payment method, you could be unwittingly making it difficult for your customers to pay you—and that’s why they’re not paying you on time. Instead, offer them multiple ways to pay. If you’re not already offering it, consider adding online payments as an option; they’re quick and easy, and your customers will be happy to pay when it only takes them a couple of minutes! There are even technologies that will allow you to send a secure link to your customers that allows them to make the payment on their phone.
2. A Generous Credit Policy
While there’s any number of reasons customers may fail to pay on time, if your firm is facing a tsunami of overdue accounts, you need to take a good look at your credit policy.
Chances are you’ve been a bit too lenient; you’ve extended credit to customers who shouldn’t have qualified. Revise your policy with stricter standards, and ensure your team is thoroughly investigating and vetting each account application. Creating a high-quality customer base will help minimize the number of late-paying customers you have.
3. No Incentive to Pay Early
If you want your customers to pay on time (or even early), consider an early payment policy. Relatively few companies offer this option to their customers, even though it generally doesn’t cost them much.
If you can offer customers a slight discount if they pay before the due date, they’ll be more likely to pay you sooner. The discount shouldn’t be so deep it affects your bottom line but generous enough to give the customer good incentive to pay early.
4. Lenient or Unenforced Late Payment Policies
The opposite of early payment incentives are late payment penalties. Most companies brandish these policies. They work the opposite way from the early payment policy; they suggest to the customer there will be negative consequences for not paying on time.
As much as companies profess these policies, sometimes, they aren’t enough to get customers to take action. Customers might not see your policy as harmful enough for them to need to avoid overdue payments.
Worse, some companies aren’t very effective at enforcing overdue penalties—something customers often become aware of rather quickly. Make sure your penalty acts as a deterrent for late payments, and enforce it on overdue accounts.
5. Failure to Follow Up
Your customers are busy. You’re busy too. Sometimes, you can’t find time to connect with the customer—even over a simple reminder about an overdue bill. And, in many cases, that’s all it takes to get the customer to pay off the overdue account.
Be sure to follow up with your customers about their accounts. Timely follow up can help busy or forgetful customers pay their bills sooner. For more difficult cases, following up is an important part of delivering good customer service and maintaining your brand.