If you’ve read any of our former blog posts or if you are subscribed to our newsletter, you know that Clients ARM advocates proper use of front-end techniques to proactively avoid delinquent accounts in the future. For larger businesses, an occasional past due invoice may not be such a cause for alarm. Yet, for smaller businesses even a single unpaid invoice can often affect your bottom line. Here are some ways that you can avoid being stiffed and get your clients to pay your invoices. Although collection agencies can be a good option when they are absolutely needed, you must keep in mind that you will pay some of what is recovered to the collections agency. So, it can be much more helpful for your bottom line to get paid from the very beginning.
Show Them the Money
If you charge interest or late fees, add that math to the bottom of your invoices. This can help your clients see how they are saving money when they pay on time. Don’t just say that you charge a 1% late fee if they pay late. Show them the actual cost of paying late. For instance, “If your balance of $400 is not paid by 15th, 1% is added making the amount due $404.00.”
Now, to some people, that tiny bit may not make a difference, but to many clients it will. They will also realize that they can save more money over the year by paying their bill on time.
Your Invoices Should Be Consistent
If your client signs a contract that says that they can expect their bill at a certain time each month, you need to make sure and send it at that time. It is important to be consistent so that your clients know without a doubt when their invoice will arrive and when it is due.
Another common mistake is stating in your service contract that invoices are due upon receipt but not changing wording on the invoice to reflect that. If your client signs a contract that says “due upon receipt” but their invoice says they have “net 30 days,” which one do you think they’re going to follow?
Change Their Payment Status
If you have clients who are habitually late with their payment, change their payment status. Instead of the client being able to pay later, they must pay in advance of or at the time services are rendered. It’s something that we see often in healthcare facilities (payment due at the time that services are rendered). It can very easily be applied to other industries. Make sure that you send out a written notice of your change of policy.
Visit Business Clients
If you provide services to businesses, you can also drop by if they miss a payment. You could call and ask about the payment. If they say that they plan to mail it today, offer to stop by and pick it up if they are in your area. Collection visits work particularly well for larger invoices. However, when you go to pick up the payment you should make sure and take some documentation of the amount due. Don’t forget to mail your client a receipt for the payment.
Make Follow-up Calls
Did you notice red flags from clients that made you think that they’re in the midst of financial distress? Be polite when you call. You’re looking to help your client solve a problem. These follow-up calls also work well if clients have missed a payment and state that they can pay you on a particular date. Follow-up on that date to collect the payment.
Clients ARM provides more than 30 years of Director level experience in billing and accounts receivable management. If you’re looking for a way to streamline your billing and have fewer past due accounts, give Clients ARM a call to book your free process review. We work with service-based businesses and corporations of all sizes to provide custom billing solutions. Call us today at 206-596-3000.