How to Avoid Non-Payment of Invoices

While it is ideal if you can have your customers pay prior to or when the delivery of goods or services are rendered, it is not always possible to finalize a deal on these terms. More often than not, goods and services are purchased on credit or on term agreements to pay in the near future. rnSo in the push to sell, companies must way the trade-offs and do what they can to protect the bottom line. As with any form of credit, there is always the risk of non-payment for goods or services you provide. Since the failure of customers to pay can or will have a negative impact on your company’s cash flow, there are steps you will want to put in place to help eliminate this risk. Set credit termsrnCredit terms are the most critical thing to a business when it is involved in business-to-business trading. Without providing credit term information, a customer may believe they are able to pay when they want to rather than when the payment is truly due. An invoice must always state the terms on which the invoice is due for settlement clearly. Surprisingly, many companies overlook this simple practice, and send invoices without including any credit terms. Send the invoice immediatelyrnTo help avoid non-payment, the presentation of an accurate invoice to a customer is a very important first step after goods and services have been supplied. In addition to the credit terms, the invoice should clearly show what items have been supplied, when they have been supplied and where they have been delivered. Call to make sure items have been receivedrnStart following up with the customer a day or so after the invoice has been sent. Ask if the customer is satisfied with quality and quantity of the goods or services supplied and make sure they have received the invoice. If you are dealing with a large company, check to see if the invoice has been approved and submitted to the accounts payable department for payment on the due date. In some cases, it may be a good idea to record the collection conversations to prevent discrepancies. Continue to follow uprnOnce you have made sure the goods or services have been received, don’t stop connecting with your customer. Contact with customers should be a continuous process until payment has been received. If an invoice is still outstanding 60 days after the invoice date and there has been no further contact with the customer, there in a greater chance there will be a problem collecting. After confirming the delivery of goods, the next contact should be on or just before the invoice is due for payment. Use the opportunity to make sure your customer is satisfied with your product or service and to confirm that the payment is forthcoming. When communicating with the customer about payment, try to get a commitment on when the check will be sent out and follow up if payment is not received. As previously mentioned, remember to record dates of conversations and any promises made or excuses for non-payment. Know how to handle delaysrnMany businesses, especially in a tough economy, will withhold payment until it is asked for. Under this scenario, it can be a case of first-come, first-served, so you want to be first in line. Other customers may employ deliberate delaying tactics to stretch payables and conserve their cash. When confronted with any of these tactics, ask your customer who approves invoices for payment and follow up with this person directly. You may also want to consider accepting different payment options. These can include checks, electronic transfers, wire payments or credit cards, making it easier for customers to pay. If your customers are habitually late or difficult to deal with when it comes to payment, it may be a good idea to request payment upfront to avoid the situation entirely. rnWhile all of this may be easier said than done, these steps demonstrate a commitment to your business and its outcome, and are necessary in order to avoid cash flow challenges. Putting the correct steps in place and making them part of your business practice can be the differing factor between business growth and having to lay-off employees or worse yet—close your doors.