Positive cash flow is the mainstay of every business enterprise. However, for every customer who pays in time, there may be a few who will delay the payment on one pretext or the other. As such, sometimes, it is very challenging to get timely payments from some of the slow-paying clients.
This can be exasperating for an entrepreneur as her business organization will have to clear up outstanding bills regularly, meet operating costs and pay up all the miscellaneous expenses as well as staff salaries in time. So, here comes the crucial question about how to motivate the customers to pay in time?
One way to do it is by offering discounts or incentives for early payments. For instance, if the credit period is of 30 days, but you want clients to pay up within ten days, then giving a 2% or 3% discount will entice them to pay up the invoices earlier, resulting in better cash inflow.
Secondly, if you want to ensure that the customers don’t delay payments beyond the credit period, then you must put a penalty clause in your contract or agreement with them. And you should highlight the penalty terms in every invoice and contract. As no client would want to incur penalties, your invoice will invariably get paid in time.
Once the penalty terms are made clear, you should stick to them. Despite this, if the payment is not received in time, then remind the customer very politely that the payment terms haven’t changed and penalties will apply irrespective of other circumstances.
Thus, if you don’t waiver on payment or penalty terms, the client will pay up as soon as possible with the penalty. If he is unable to pay up, he will ask for a grace period and will invariably pay up during the grace period. If he doesn’t pay up even after the expiry of the grace period and a polite reminder thereafter, you may have to take the help of debt collectors or the litigation agent.