What methods of payment do you accept from your customers? The more payment options you are prepared to accept, generally the easier it is to receive an on-time payment. Make it as easy as possible for your customers and therefore for you.
It is important to consider all the costs involved with different payment methods, but sometimes receiving payment on time will end up costing your company less than having to chase down payments and having to wait for cash flow to keep your business running.
Do you offer debit through ACH? If your customers can draft money directly into your account it makes the payment process automated and incredibly simple. The Electronic Payments Association NACHA has great information on how ACH works, how much it costs, and the rules and regulations in place to make this form of payment safe and secure.
Benefits of ACH Payments
- A simple alternative to credit cards and checks.
- Lower-cost on payment than either checks or credit cards.
- Faster payments than checks.
Do you accept online payments? If invoices can be paid online with a credit card there is no waiting for checks to come in the post. Again, make sure and check the cost of accepting credit card payments. You can set up and use your own merchant account, or alternatively, use a third party merchant.
If your customers are struggling to make payment, consider helping them out by offering an installment plan. It is not an ideal situation, but if you are in a position to be able to offer this form of payment, it is a structured way of receiving your money from a customer who may not otherwise be able to pay. Make sure you structure the payment plan carefully so that it works for both you and your customer.
If your customers are late sending their checks, you may want to consider adding a finance charge, which will also motivate them to stick to a schedule and to pay on time. It is important that you have informed them beforehand that there will be a charge for late payment so you do not take them by surprise and create friction in the business relationship.
Lastly, while you are busy helping out your customers to make it easier for them to pay, don’t forget that the process needs to also work for you, your cash flow is the most vital part of your business success. Consider factoring your accounts receivable for payment now on invoices due 30 – 90 days later. Not only will you benefit from receiving money earlier, you will have a built in AR department, leaving you free to manage your business not your invoices.