PEX Card wants to help businesses with expense management. Each week we will provide advice, solutions, and answers to your questions. Question: How can I get clients to pay their invoices on time? Our company policy is net 30 days, but I am constantly chasing clients who are at least 60 days past due. I don’t want to lose their business but the inconsistent payments make it hard to run my business.
Answer: There are some questions that immediately come to mind about your situation:
- Are you chasing the same clients every month?
- What percent of your invoices are past due?
- Is the past due status the norm in your industry or specific to your business?
- Have you had any conversations yet with your clients? If so, what has been their response?
Our first suggestion is to talk to your clients if you haven’t done so already. Find the root source of the inconsistent payments. Would you be willing to offer an incentive (e.g. 2% discount) onprompt payment? If your business doesn’t accept credit cards, look into opening a Paypal or Square account. There are fees associated with accepting payments through these companies, but it sounds like improving your cash flow and making it more consistent is a priority. In the meantime, you should also review your financials to allocate for inconsistent payments. Don’t assume payments in net 30 days until the situation is resolved. Lastly, the inconsistentpayments could be a sign of even bigger problems—namely bad debt. Make resolving this problem a priority. If it requires losing some business that may be a better option than debt collection.