Strong cash flow is essential for all types of businesses. Without it, they are unable to pay the rent, the salaries of their employees, their suppliers, and other expenses. This makes the prompt collection of unpaid invoices a top priority. Here are some steps to help you effectively accomplish this.
Research Payment Records Before Offering Credit
Before offering 30 to 60-day payment terms to your clients, go online to check their payment histories. If they pay other vendors promptly, they will probably pay you promptly too. Once you have verified their good payment habits, you can offer them credit. However, if customers have poor credit histories, you should have them send advance payment or pay in full on delivery.
Draw Up Detailed Contracts
Before you deliver products or provide services, you should draft a comprehensive contract that includes delivery and payment schedules. This is especially important if you offer 30 to 60-day payment terms. It will simplify legal action in the event of unpaid invoices.
Follow Correct Procedures with Paperwork
Have your clients sign delivery acceptance letters as soon as they receive goods. Additionally, send out invoices immediately after products are delivered or services are completed. Include a copy of the acceptance letter with the invoice.
Handle Late Payments Professionally
As soon as payments are past due, contact your clients to verify that there are no problems, and schedule another deadline for payment. No matter how the customer behaves, remain courteous and professional. Attempt to solve any legitimate disputes. If your client still refuses to pay, you may have to work with an attorney or a collections agency to obtain the money owed to you.
Strengthen Cash Flow with Financing
Clients with 30 to 60-day terms may pay more quickly if you offer them discounts for early payments. Otherwise, some form of financing can help keep cash flow strong while you are waiting for payments from customers. Financing options include lines of credit, asset-based loans, or invoice factoring.
For more advice on collecting unpaid invoices, contact Critical Capital Solutions.