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PyraMax Stories & Articles

When it comes to managing your finances, there's a lot to know, and it seems as if things are changing every day! We love educating our customers, and that's why we maintain a thorough selection of stories and articles.

Get Paid Faster: Stay on Top of Receivables for Better Cash Flow

By Mel Toy, CTP

Is your Accounts Receivable stretched beyond desirable? Are you dedicating valuable staff time to collecting payments? When you have issues with collectibles this can lead to trouble meeting your own financial obligations. There are some simple steps you can take to get your business paid faster.

Consider requesting a deposit

When applicable, require a signed contract and request a deposit payment particularly for new customers. With an investment upfront, the client may naturally be more attentive to their deadlines and yours throughout the project. A deposit also provides working capital for any inventory or supplies for instance. It can also help decrease interest payments on borrowed funds and keep your business funds more liquid.

Invoice promptly and frequently

When and how often you invoice will depend on the nature of your business. However, many companies have a uniform policy for small or large clients. By varying time frames for job size, you may be able to collect cash more quickly. For instance, for smaller projects you might determine to send an invoice immediately, net-10, or net-15 days; or perhaps you require cash on delivery, depending on the industry. For larger clients, perhaps net 30 days with a discount rewarded if paid within 10 or 20 days. You would have to do the math for any discount application, as at a certain point there is diminishing returns for accepting discounts. As a general rule, the more quickly you invoice, the better cash flow you’ll have.

Make it convenient for your customers to pay you

There are many ways for clients to pay other than the traditional receipt of invoice and check in the mail. If the volume is there, accepting credit cards can help reduce payment float, and has the added benefit of some liability being transferred to major credit card companies.

In addition, offering an online portal that accepts electronic Automated Clearing House (ACH) payments and credit cards can help you get paid faster. Having your bank account set up to receive wires is also another convenient solution, specifically for larger value transactions. Wires offer immediate settlement and confirmation of payment.

Charge fees for late payments

It is a best practice to be transparent with your company’s payment terms on the invoice. You also should consider spelling out your policy on late payments. If discount terms are a strategy for your company, those should also be disclosed. This encourages appropriate behavior from the start. When companies have a history or habit of paying late, they may prioritize your business if it has a stricter policy.

Treat customers well

There definitely should be rules and policies when it comes to payments in order to run your business efficiently. However, never forget the customer is the reason you’re in operation. Make sure you always treat them with respect and say “thank you”. In fact—thank them on your invoice and whenever you have the opportunity. Manners go a long way. Even if a customer may be late on a payment, give them the benefit of the doubt. A grace period or two with a kind reminder of your policy can help you correct late payment behaviors and reach your cash flow goals.

 

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