It is a fact that cash flow is the main lifeline of any small business worldwide. So when in a business the customer payments are late, or a businessman finds themselves waiting too long for getting their big paper checks, then it is high time for them to get more proactive about it and think about all the ways for getting paid faster.
Here are the five tips that a person needs to follow to get them paid faster by all of their customers, thereby improving their business’ cash flow.
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1. Here a businessman can offer discounts for getting early payments from their customers.
Here offering a good amount of discount to the clients for getting early payment is a win-win for both the business and the client. Here the clients can get a small amount of discount, but in turn, it will improve the business’s cash flow. Likewise, here, the company will get all of its money quickly. This will help a company to improve its cash flow. All kinds of payment discounts are also known as prompt payment discounts. Here the discount amount is usually a very small percentage of the total amount, and it can vary for 1-2 percent. Overall, offering discounts is a very good incentive for all the clients to pay early, and here this also reduces the risk of the customers that are usually skipping out on payments. Here this formula usually promotes goodwill between the business owners and customers. This he’s the business to get the customers who will do business with them after that too. But here, a businessman needs to pick and then choose and sort out which customers receive an early payment discount. This is because discounting on a product will cut your profits.
In addition to that, a person should also know that most businesses do not offer early payment discounts to customers who pay their money by using credit cards. This is because the business has to pay fees to the credit card companies.
Finally, it is also very important for the businessman to ensure that the discounts they are giving out are accurately recorded in the company’s accounts receivable program. It should not look like the customer did not make the full payment they needed to make here.
2. A businessman can also charge late fees to get paid faster by their customers
This is often considered less a punishment and more of a business incentive. Here a businessman can improve the cash flow by charging late fees. This will always help the business get paid faster. The company had to inform their customers at the beginning of all of their transactions, or they had to show them about the agreement about any late fee, and here they also had to print the fee structure on their invoice. Here, the late fees are often calculated by using an interest calculator. Here this is a machine that helps determine the cost based on the number of days by which the payment is late. Here a businessman should be well aware that the maximum interest rates should vary by each state’s usury laws. So here, they should check with their accountant and attorney before setting their fees.
3. A businessman should have the option of getting paid in installments
Although many people worldwide are typically used to getting larger invoices, a businessman needs to consider setting up an installment plan for some of their regular customers. Here receiving half of the payment upfront will help them improve all of the business’ cash flow.
This is also popularly called a “good faith payment,” This money serves as a security deposit for getting the final price. These kinds of faith payments are generally nonrefundable, and they all must be documented clearly in writing.
4. They should send reminders of overdue to all of their customers
This is a very good initiative. Here sending all the periodic reminders about impending payment on their due dates can help a business increase their possibility of getting paid faster on a particular date. Here they can easily be set up for getting paid on an automated accounts receivable program. Here they can set up their invoicing program, which will send out an overdue notice as soon as payment to be made by the customer is late. Here the delaying payment generally reminders tell all customers to make their payments on time.
5. A businessman should allow their customers to pay the way they want to
Here a person should know that the customer preference for payment methods usually varies. So the businessman needs to offer as many payment solutions as possible for their benefit. A recent report about consumer payment preferences in 2021 says that debit cards or any direct bank debit are the most popular way by which all the customers like to pay. If there are any recurring payments to be made, all the customers prefer to set up any type of auto-payment that they want.
Here it is also seen that the preferences usually vary by age. All the older customers usually prefer to do credit card payments, while all the younger generations generally prefer to use mobile and digital payments.
