5 Ways a Business Owner Can Properly Deal with Late Payments
When doing the company’s monthly financials, the term “accounts receivable” is written under the Current Assets section. A large amount of receivables bodes well for the company, until lengthy periods elapse and client payments are still left unsettled. Operational costs, investments, and other expenditures can break a company’s budget if profits are not claimed.
To stay afloat, organisations need to come up with strategy to to properly deal with chronically late payers.
Dealing with late payments is never easy, but there are ways to make the collection process less stressful. The goal is to enforce policies that compel clients to settle their dues on time.
Deal with Contracts and Clear Payment Terms
A contract is an agreement that binds all the parties involved in a project or a deal’s terms and clauses. This includes the scope of work, the amount to be paid by the client, and the due date for the payment. A company owner must consider a contract as a legal document that means a court case can be filed against the parties who fail to honour the contract’s terms. It compels the clientele to pay on time in fear of losing a legal battle, settling the hefty costs in hiring a legal team.
Before agreeing to work on a project or engaging in any business deal, a company owner should ideally have a contract ready as a means of protection. Otherwise it could throw the legality of the transaction in question. Without a contract, a company won’t get compensation for the services rendered. We recommend you register your company with the Australian Securities and Investments Commission, so that the validity of the transaction holds more weight in court.
It’s also best to create a “universal” contract that can be applied to most projects and deals. A business owner can consult an experienced corporate lawyer if need be.
An Efficient Payment Tracking System
Keeping track of every payments can become a problem, especially if the company deals with numerous clients and has a lot of projects. There is a possibility that the organisation might not be receiving all of its returns and could be filing flawed financial statements. To avoid this, an organised approach in filing purchase orders must be employed.
Ideally, every purchase order should be assigned a number, with the pertinent details surrounding each transaction noted down. Use finance platforms like Xero and Quickbooks to manage the company finances. Always make sure to e-mail and loop in the finance department and top management so they can readily access and update the payment trackers.
Furthermore, accounting programs and online applications can be used to track payments as well as for cross-checking purchase orders. Through these tools, payments can be monitored and transaction details can be updated in real time and with ease.
Contact the Client Immediately
Sometimes the most effective methods are the simplest ones. Client companies are often busy with a lot of things, so much so that the act of settling payments can be buried at the bottom of their growing-to-do-list Upon successfully completing the tasks in a project, a business owner should immediately communicate with the client, either over the phone or through a face-to-face meeting. Sending an email or an SMS is fine, but these methods are rather impersonal and may not drive a sense of urgency on the client’s part.
Moreover, meeting up with the client can lead to more projects down the proverbial road, perhaps with better rates and terms. Good communication can pave the way for better things, which is why you hear about business owners snag juicy long term deals while playing golf or during client calls.
Consider Hiring a Collection Service Provider
It is rather unfortunate but some clients will find a way to delay or refuse cash outs, even at the expense of reliable suppliers. No matter how much a company owner prods or reminds them of the project terms, some simply won’t budge. Fortunately, there are companies that specialise in helping other firms secure their overdue receivables; one is a collection agency and another is a Fin Tech platform that provides insights on the ideal times to nudge the client as well as the best possible approaches in doing so.
Collection agencies, often well versed in international debt law, act as agents for companies who are in dire need of compensation. Various tactics are enforced by these outfits to secure payments; they tend to be aggressive whenever necessary. Having one or a few agencies on the company’s list of contacts is certainly a good idea.
Platform providers, on the other hand, present a more civil approach to collecting money. Through the use of data and information, users can observe the behaviour and common practices of debtors in question, generating a considerable load of insights and solutions for every possible scenario. Through these, business owners can gain several plans of action in dealing with difficult clients.
Find a Source of Quick Funds
In the event that payments are delayed for long periods, a company needs sufficient cash to continue its operations and cover the overhead expenses. A conventional loan is a sound option. However, the loan application process can be time consuming and tedious in many cases. Waiting for the creditor’s approval could result in cash shortfalls for the company. A more reasonable option is to transact with an alternative lender.
Alternative lenders make technology work to their advantage and the benefit of their clients. By hosting an online alternative lending platform, business owners can transact over the internet and secure an approval (and cash) in a matter of days, perhaps hours or for even shorter periods. It’s a far cry from the application process of traditional lenders, which can take up to several months before money can be granted.
Also, alternative lenders provide intuitive financial programs to their clientele. A merchant cash advance comes with no collateral and offers repayments that are directly proportional to the amount of credit card sales, while an unsecured business loan can be treated like a credit line with small daily repayments. Both programs yield convenience and are friendly on a business’ inflow of returns, regardless of how large or meagre they are.
Given the above mentioned solutions, a business owner is advised to keep their dealings as positively natured and civil as possible. A delayed payment could present problems, but by fostering goodwill, a debtor may be inspired to pay diligently in succeeding projects and prepare even more advantageous deals with their suppliers. Build better bonds with your clients, and it could all lead to better returns for all parties involved.
Or call 1300 760 930 to speak with one of our friendly Lending Consultants now.