It happens all the time. A customer fails to pay on time, the credit card expires, or the check bounces. What can you do as a business owner to spend as little time as possible on these items, but still get the cash collected? Your favorite Orange County Bookkeeper is here to help with four simple ideas to help you get paid faster.
1 Re-examine Your Credit Policy
The best way to speed up collections is to change your payment terms, if possible. Is there any way you can have credit customers pay up front? Perhaps you can collect an initial deposit to minimize your risk. Another way is to request the final payment right before you deliver the final product. In some businesses, you may even be able to convert credit terms to a layaway situation, like used in retail.
2 Be Proactive
Send your clients proactive reminders. Give them a reminder call and email just before the payment is due if you have this luxury. If the customer pays by credit card, monitor credit card expiration dates, and send reminders to update the card before it expires. Make it easy and clear on your website support section how a customer can update their credit card number on file at any time. Automating this process will save you a ton of time.
3 Report Payment Failures and Disputes Quickly
It’s inevitable that you will experience customers whose credit card payments, ACH withdrawals, and checks fail or bounce. As a business owner, you need to have solid procedures set in place to prepare you or your employees to process these exceptions quickly. When a credit card payment fails, make sure your shopping cart, merchant account, or gateway processor notifies you of the failure. The same is true of bounced checks or failed ACH deposits. Contact the customer right away to provide them an opportunity correct the situation. Assess any extra fees and flag the customer account if you want to place any future payment or credit restrictions on them. You may also have customers that report disputes to their credit card company. Respond timely to these transactions as there is always a tight deadline, and make sure you have all of the documentation you need at the time of sale.
4 Develop Solid Collections Processes
If the payment is late, start your collections routine. Send out friendly reminders at first; then progressively get more assertive as the payment grows later and later. Follow-up steps are very important. Make sure your customer is getting your notifications, and give them a call before you have to take legal steps with them. Finally, if necessary, turn the payment over to a collections agency who can impact the customer’s credit report and possibly collect your money.
We hope this activity rarely occurs in your business, but if it does, these solutions are a great way to reduce it. Check to see if you have all the processes described above in place to handle collections in your business so that your cash continues to flow. If you need help implementing these processes and getting paid faster, reach out to Your Favorite Orange County Bookkeeper at Team One Accounting.