Your cash flow is the lifeblood of your business. Managing payment terms well can strengthen client relationships. Here are six ways to turn your accounts receivables into reliable cash flow and show your customers you’re a solid business resource.
- Agree on terms up front
The pricing conversation can be uncomfortable, but having it is a good way to make sure you and your clients are on the same page about payments. Setting terms decreases the probability of disputes and leads to more trust and stronger customer relationships.
- Consider requiring a deposit
Particularly for small business owners, requiring a deposit is a great way to mitigate risk, and it can offer a number of other upsides as well:
- It is a good way to generate the money to cover upfront costs
- It reinforces the contractual reality of the business transaction
- If they flake out of a payment, you won’t take a total hit
- Invoice immediately
Invoicing in a timely manner shows that you’re on top of your finances. It also keeps your business top of mind with your customers. Plus, delaying invoicing raises the risk that your customers may no longer have the budget, decreasing your chance of collecting payment.
- Use net 15 payment terms
While expecting payment immediately is unrealistic, using net 30 terms can put your company in the back of your customers’ minds. The “sweet spot” for payment terms is net 15.
- Check in with customers when sending an invoice
Touching base with customers gives you the opportunity to connect with them regularly, which offers a host of benefits:
- You can thank them for their business, helping everyone to feel good about the relationship
- You can restate and, if needed, explain the payment terms so everyone is on the same page
- Your customers have a platform for voicing issues, questions or thoughts, allowing you to address any situations as they arise
- Make it as easy as possible for your customers to pay
The easier you make it for your customer to pay, the more likely it is that you will get paid. Thanks to technology like QuickBooks, you have a few options for invoicing and collections:
- Allow your customer to pay online with a credit card
- Set up direct deposit
- Send the customer all of the materials needed for making a payment
Bottom line, it’s not hard to establish a few steps that can make sure you get paid on time, in full, and without damaging customer relationships.
What are other ways you encourage healthy accounts receivables? Share your thoughts below!