Every professional service experiences clients who don't pay on time or always have trouble paying their bills. No matter the strength of the professional relationship, at some point even your best clients will experience a hiccup in their finances. Fortunately, through careful procedural changes and invoicing, you can reduce the instances of missed or late payments and improve your operational cash flow, but enforcing late payment penalties isn't always the ideal option. But that then begs the question: when is the right time to begin enforcing late payment penalties?
The answer is a tricky one. On one hand, a positive relationship would promote mutually-beneficial partnerships in which you can trust each other to keep to the previously agreed-upon terms. On the other, you have a business to run and that's not possible if your clients aren't paying on time, but enforcing penalties can disrupt your business relationship. By promoting a healthy business relationship and clearly establishing rules at the beginning of the partnership, there's a better chance to negate any future complications.
Rather than encouraging negative consequences if payment is late, incentivizing customers and clients to pay their bills on time is a great way to maintain the customer relationship and create a positive emotion as it relates to closing their invoices. Offer services exchange or discounts for early payment or payment within 7 business days.
As far as actual payment penalties, charging interest on unpaid accounts is a good way to demonstrate urgency on the side of the client. After all, there's a reason financial institutions charge interest. Being as transparent as possible in the billing process and demonstrating a clear timeline of payment windows, interest penalties, and late fees as well as any incentivized payment options you offer will go a long way to helping your clients pay you on time.
Once it's clear that payment isn't coming, you need a proper system in place to handle delinquent accounts. That's where Clients A.R.M. comes in. Our accounts management and receivables experts have the highest recovery rate in the industry. We can help you establish effective, enforceable accounts receivable processes to streamline your collections operation and ensure you always get paid on time.
Contact us for a free consultation and find out how Clients A.R.M. can revolutionize your AR and billings processes and so much more.