How to Prompt Customer Payment – Corporate Accounting Services Tips

Collecting payment on invoices isn’t the most enjoyable part of running a business. As corporate accounting experts, however, we know that prompt customer payments are crucial for maintaining cash flow. If your business is chasing down payments every month, you aren’t alone.

Sixty-six percent of business owners agree that a delay in payment processing is the most significant problem with their cash flow. Additionally, 34% of small businesses say their cash flow issues are because customers aren’t paying at all. Here are some proven tips for getting your customers to start paying on time.

6 Tips for Prompting Customer Payment

1. Provide customers with agreements or quotes

Before you start a project with a client, consider creating an engagement letter or quote. The document should clearly state the payment terms (i.e., 50/50, Net 30/Net 60, due upon receipt, etc.).

When you get to the invoicing stage, include a reference to your initial quote or engagement letter. Adding this reference helps jog the client’s memory and gets you paid faster. Engagement letters and quotes also help determine what should be billed and clarify any overages.

2. Invoice promptly

This tip might seem obvious. However, in our collective years of providing corporate accounting services, we’ve seen that many companies who struggle to get payments also struggle to send invoices on time.

Prompt invoicing is vital because the sooner you bill the client, the sooner they pay you. Plus, it models an expected behavior. If you show your customers that you’re punctual, they’ll be more likely to follow your lead.

Invoice as soon as a project is completed or on a regular date each month. Just be sure you still take the time to be accurate. Follow your standard protocols, and don’t rush invoices out the door before they’re complete.

3. Offer multiple payment methods:

Sometimes, the payment itself isn’t the issue. Instead, the method of payment is where the problem lies. Be sure to offer plenty of payment methods, including ACH, wire, credit card, checks, and more.

Include details for each payment method on every invoice. Many companies avoid credit cards or wires because of the extra fees. However, as any corporate accounting services provider will tell you, paying a small fee for timely payment is preferable over late payments or no payment at all.

4. Get clear on expectations

Every customer has different needs. Set your accounts receivable relationship up for success by clarifying expectations upfront. Ask your contact what their requirements are for invoices. Some companies need invoices addressed to a specific person. Sometimes they need the hours worked included, or require progress invoices, employee ID numbers, or other details.

Ultimately, you want to make sure that the way you’re invoicing isn’t causing hang-ups in your customers’ accounting or backend processes.

5. Send to the right person and maintain excellent client relationships

Make sure you’re sending the invoice to the correct person. Your invoices could be going unpaid simply because you’re sending them to the wrong email address.

Establish and maintain a customer service approach. While people in A/R may get frustrated from dealing with excuses for late payment, it’s essential to treat every client with respect and focus on problem-solving rather than playing the blame game. It’s possible that a small miscommunication is all that’s standing in the way of prompt payments.

A recent experience I had with a plumber illustrates the importance of customer service. I filled out all the paperwork to fix something at my house, but the company representative had forgotten to gather my payment information. The next morning I received an angry phone call from their collections department demanding payment. At that point, I hadn’t even realized that I hadn’t paid. They treated me like I was trying to skip out on payment when their error created the problem.

In this case, a little customer service could have gone a long way. Take a friendly approach with collections. Ask your customers how you can help, and do what you can to make payment as easy as possible.

6. Use a retainer-based model or progress billing

Instead of sending an invoice at project completion, consider a retainer-based or progress-based model. With a retainer model, you get cash-in-hand before you ever start working. An upfront payment ensures the client is invested in your agreement. You can also perform regular, recurring billing with retainer-based models.

With progress-based models, you can schedule payments based on upon completion of specific milestones or after reaching certain dates. In the same way, this model keeps you from doing too much work before ever getting paid.

It’s essential to lay out these terms in the agreement. It would be best if you were explicitly clear about when and how much you will invoice so your project doesn’t get hung up in the approval process.

Do your AR processes need improvement?

If your past-due payments are out of control and you can’t tell what’s causing the hang-up, it could be time for professional corporate accounting services to look at your processes and make suggestions for improvement.
Haskell & White provides assurance, tax compliance and planning, and advisory services to middle-market companies. If you are looking for process improvement support, we can advise on many topics, including improving your internal controls in place for your accounting team. Contact us now to learn how we can help.