When customers pay on time, it is money in your pocket. When payments are late, you are, in effect, extending an unwanted loan. Chances are, you have enough of your own loans to worry about.
It is important to use every tool available to speed up your small business's collection. The following tips are common sense, but there are some technology tie-ins that make common sense actions more commonly available:
Online services are an excellent way to check references. Often, it is only a handful of chronic later payers that cause the most trouble. By checking references before you begin working with a new customer. It is possible to anticipate people who don't pay on time, and that will let you offer terms in your favor, such as C.O.D., or some percentage of payment up front.
You can use online sources to get a credit report on just about any company, and $100 spent checking a potential customer's credit can save you big trouble later. Larger companies will have a Dun & Bradstreet profile that provides a good picture of the financial health of your new customer.
Networked computers and groupware can help you send bills promptly. Don't create--or compound--your own problem by sending bills late. This means that your shipping and billing departments must work together closely, and this is easy for those companies that have their computers networked.
Software programs can help with this communication. For example, look for a program that records terms from the accounting department, while also sending relevant information from shipping to trigger the billing cycle. The right software provides scheduled alarms for accounts receivable to send out reminders to overdue customers. Even simply using e-mail to improve communication among the various departments can make a big difference.
Call customers and automate your communication with them. Keeping in touch is one of the best ways to make sure your bills aren't ignored. One good strategy is to call the customer a week or so after billing to inquire about their satisfaction with the product or service. One bonus: such follow-up improves your customer's perception about the great level of your company's customer service.
Contact management software programs help by managing detailed information about your customers and can be set to notify you about making the follow-up calls. For some businesses, a fax or e-mail follow-up may be useful, and these can be arranged to go out automatically.
