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Why is it important to be paid on time?.

23/06/2022

Late payments. These words can have a huge impact on your business. Cash is the lifeblood of any enterprise. Quite simply, if you don’t get paid, you won’t be able to sustain your business. Late payments make it difficult for a business to pay either its staff or its bills.

The quicker money comes into the business, the quicker you can pay your own bills. The idea of cash flow in a company is to use money to build money. A healthy cash management allows you to use available money to develop your business.


Late payments can have many detrimental effects on your business, including:

  • They can affect your productivity. As a business owner you no doubt have other priorities than reminding your customers to pay their bills. Claiming your money is time consuming and it is a job in its own right.
  • They can affect your ability to plan your cash flow. Planning a cash flow forecast is essential if you want to avoid future financial troubles. It can be difficult to make an accurate forecast, especially if you are still facing late payments.
  • They can prevent you from running your business effectively. Who says less cash, due to late payments, says payment difficulties for your business. You may not be able to pay your own bills. It's a domino effect.

 

So how do you make sure you get paid in full and on time?

 

1. Inform clearly

Establish clearly defined credit and collections policies upfront. Consider how much and how long you can afford to get paid without affecting your cash flow. Decide which customers will be eligible and how many. Specify this in your terms and conditions of payment, as well as the consequences of starting the collection process in the event of late payment.


2. Secure your back

Always ask your customers for a quote or a signed order form, obviously including your general conditions. Find out about your big customers and their creditworthiness. Take calculated risks.


3. Ask for a deposit

It is normal to ask for a deposit on the order, or even a second deposit before the end of a project. Claiming reasonable down payments is a sign of seriousness for your client and guaranteed cash to your business.


4. Invoice promptly

Do not wait to send your deposit invoices as closing. Highlight a due date as well as your payment terms.


5. Various payment options

Depending on the country and mentalities, offer various electronic payment methods (transfer, credit cards, etc.) but also cash or checks. Regardless of the means used, the important thing is to get your payments on time and to satisfy your customers by making it easier for them.


6. Check your accounts

It is important to regularly monitor, for example each month, the payments of your customers. This will help you identify any changes that might alert you to a potential problem. Thus, a regular customer who falls behind in their payments should alert you. Analyze the situation on a case-by-case basis and if necessary, take the necessary measures before the situation goes out of control.


7. Don't put all the eggs in one basket

Diversify your customer base. 100 small customers will always be preferable to a single large customer, especially when they are late in payment and thus risk putting your business in danger.

 


To increase your chances of getting paid on time and in full, you must establish and follow good management practices from the start. Remember, a sale is not a sale until you get paid!

Business is a balancing act. You need cash to grow and make money. Being paid on time can make the difference between a good month and a bad month. If you pay late or submit a late invoice, your cash may be affected.


What to do in case of late payment?


And when a problem arises, when you face a late payment, act as soon as possible! Send a first payment reminder directly. And, if your bill is still not honored when it expires, go up a gear and contact a debt collection company. You deserve to be paid. Don't jeopardize your company's cash!