How to Collect Payment From Customer: [10 Essential Tips]

According to reports, 82% of small businesses in the US fail due to poor cash flow management. The estimated amount of total unpaid invoices in the US averages $825 billion, which is equivalent to 5% of the U.S. GDP.

However, to address these concerns, getting paid timely enables businesses to operate smoothly, relieving small business owners from the hassle of continuously chasing payment. So, without any further ado, let’s discover how to collect payment from customers, securing your business’s financial stability.

So, let’s discover some essential tips and unveil how to collect payment from customers, securing your business’s financial stability.

Essential Tips for Collecting Payments Faster than Ever Before

1. Clearly state your payment expectations:

Framing clear payment expectations in mind, before getting engaged with your client can be extremely beneficial. Be it anything, let the customer know. For instance, the payment system you follow, different payment options you offer, timings of the payment, interest and late fees on overdue invoices, etc. 

Being clear and transparent about your expectations can help you avoid future disputes, and establish a strong foundation for a healthy business relationship.

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2. Decide your payment due cycle and follow consistently:

The payment due date cycle differs from business to business. You need to decide on one specific pattern and follow it consistently. You might be the one preferring advance payment options, or payment at the time of invoice issued. It can even happen that you prefer taking half of the payment in advance and half on the completion.

Whatever it is, you need to decide the one that makes sense for your business and customers. Just a quick suggestion: “Accepting payment upfront can potentially reduce the chance of late payment and benefits you in numerous ways.”

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3. Ask for payment upfront:

As said above, requesting payment upfront is the direct way to minimize the chances of non-payment. When goods are to be delivered, you can easily ask for advance payment, without any hesitation.

However, this is not the case with services. Here, things get simplified only where there is a degree of trust between you and your client. This is because services are often intangible, and clients may be hesitant to make full upfront payments without a history of successful collaboration.

When you accept payments upfront, it can help resolve many potential issues. For instance; 

• No more chasing for unpaid invoices 
• Maintenance of positive cash flow 
• Initial cost coverage

Prevention of outstanding invoices from going unpaid

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4. Send personalized electronic invoices:

With the advent of technological innovations, creating and sending electronic invoices has been simplified. Also, the fear of misplacing the paper invoices has vanished. No more spending crucial working hours making invoices.

All you need to do is:

• Simply download the invoice template available. 
• Customize it in your way.
• Add fields to include all the additional details. 
• Play with colors to match your brand. 
• Save the invoice. 
• And simply share it via email with your client.

That’s it and you are good to go. Go through this blog, to know what you can include on an invoice to ensure prompt payment.

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5. Offer multiple ways of making payments:

Diversifying the payment option to match your client’s preferences can be a smart choice. Having various payment methods cannot only help you get paid faster but even make your business look legitimate. Offer them the flexibility to pay the way they want. It can be via cash, check, bank transfers, debit or credit card payments.

Use this email template to communicate your preferred payment method with your client.

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6. Offer early payment discounts:

Offering discounts is one of the powerful incentive strategies, motivating your clients to pay promptly without any potential delays. Getting paid early is the only thing that is better than a paid invoice. And this can only be possible by offering discounts/incentives. Discount your clients either on the current invoice being billed or on the future service being rendered.

You can even have the option to convey the consequences which the client has to face, in case of late payment of the dues. Please note that when the option is given between discounts or penalties, the client will try to grab discount deals rather than face penalties.

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7. Offer a flexible payment schedule:

There might be a possibility that some clients might not be able to pay the whole invoicing amount in one go. Hence, just like the preferred payment method, offering a flexible invoicing schedule can better strengthen client relationships.

If the clients are given the leverage to pay in portions, you can win more quotes and substantially improve cash flow problems. Your clients will even appreciate the way you fit in their budget.

Here is an example of how you can offer a flexible and personalized invoice schedule to your client.

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8. Follow up on overdue payments:

There are multiple reasons why clients don’t pay you. It’s not always the lack of money or bad intentions. The person in charge of making payment might have left the workplace or might be he or she is on vacation. If not, they might have misplaced the invoice.

Whatever the reason is, timely following up through e-mail is the most humble and polite way to approach late-paying clients. Emails are basically a good starting point for settling the outstanding payments.

Good Read: Go through this blog to find out multiple follow-up e-mail templates.

Establish a systematic reminder system to politely and professionally remind clients of the amount due. Follow-up mail should include the amount of their outstanding invoices and the chargeable late fees in case payment is further delayed.

Establish a systematic reminder system to politely and professionally remind clients of their outstanding invoices. Effective communication can often resolve issues and expedite the payment process without straining your client relationships.

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9. Contact the billing department directly:

After all the possible efforts, if you still encounter persistent payment delays, consider bypassing the usual channels and directly contacting the billing department. This approach can expedite the resolution of payment issues and ensure your concerns are addressed promptly by those responsible.

Let’s understand this with an example;

If the advertising department is the one responsible for making payment to you and they are not answering, you can directly get in touch with the finance department. Just ensure that you find out exactly who you should contact for invoicing payment.

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10. Integrate an efficient estimating and invoicing software:

Why are you simply behind streamlining the payment processing, when InvoiceOwl, is capable of handling more than this? Why are you simply behind streamlining the payment processing, when efficient invoicing software like InvoiceOwl, is capable of handling more than this? Integrating such automated invoicing software can free you up from all the tedious manual invoicing operations.

• Time-saving approach: With automated invoicing, you can create and send invoices in just a few taps. You can even choose multiple file formats available in different color ranges.
• Accuracy: This digital invoicing software ensures precision and accuracy because of the built-in auto-calculating features. This substantially reduces the chances of erroneous invoices leading to incorrect payments.
• Easy payment tracking: You do not have to invest either your time or resources to keep a close eye on your payments. InvoiceOwl will simply update you on a real-time basis about the payment status of the invoices.
• Professionalism intact: Use a range of estimate and invoicing templates available to customize and generate professional-looking estimates/invoices in no time. Sending consistent estimates or invoices to your clients enhances your reliability and reputation before your clients.
• Authroization made easy: Authroizing the documents within a blink of an eye has been made easier because of the e-signing feature of InvoiceOwl. Digitally signing your documents enhances security and compliance by maintaining a clear audit trail (record) of authorized documents.
• Simplified bookkeeping: Automate your daily bookkeeping processes by syncing your QuickBooks Online account with InvoiceOwl. This integration can benefit you in multiple ways. For instance, no need for manual data entry, no duplication of entries, automatic record of estimates/invoices, streamlined accounting operations, etc.

Let’s have a look in what ways InvoiceOwl can help you smoothen and automate your invoicing operations:

Conclusion

After this detailed comprehensive guide on effectively collecting payment from customers, it will be much easier for you to maintain positive cash flow. Not just this, you might have now been introduced to a bundle of tips to streamline your invoicing operations.

However, among all the tips mentioned above, you can’t skip trying the one and that is integrating an invoicing software into your business. Start 3 days FREE trial offered by InvoiceOwl and you will see the difference in your payment collection process.