So you want to be paid promptly? At least meet your customer half way
It’s accepted wisdom that to pay suppliers promptly, that is on time according to agreed terms, is fair. It astonishes me when businesses – and it seems that big businesses are the worse culprits – deliberately fail to pay on time and seem to think that this is a legitimate business practice. But it is equally astonishing to see small businesses failing to help themselves when their customers pay late.
Some businesses are their own worse enemy when it comes to being paid on time and there is a few simple steps that they could be taking to minimize the pain of late payment.
Five ways to get paid promptly
Sounds obvious doesn’t it but it is extremely common for invoices to be sent to the wrong customer. The difference between ABC and ABC Group might seem trivial in ordinary conversation but on an invoice – a legal document – knowing the legal entity that your contracting with makes a big difference. The quickest way to get your legal claim thrown out by the court is the get your late paying customer’s name wrong.
2. Agree Payment Terms
Don’t assume that payment terms are agreed. You might think that 30 days is a standard payment term but without an agreement you cannot know when payment is late. Before agreeing to supply any goods or service a payment date should be agreed.
3. Invoice promptly
There’s no point complaining about late payment if invoices go out late – and if you expect a customer to pay within agreed terms from delivery date – be courteous enough to invoice them promptly to give them time to meet their side of the deal.
4. Send your invoice to the right place
It’s a common mistake to send an invoice to your contact – the person that sends you orders – but it’s your customer’s finance team that will process the payment. Sending an invoice to anyone other than accounts payable means you risk that invoice being delayed or worse, getting lost. Find out who deals with invoices and send it to them direct.
5. Ask for payment
Too many small businesses are afraid to ask for payment. It’s perfectly polite to check that payment is on it’s way and absolutely acceptable to chase a payment the moment it’s late. No-one’s perfect and mistakes happen. Chasing payment needn’t be confronational and done reasonably will enhance, not put at risk, a trading relationship.
One final thing – get to know what the life of an accounts payable person is really like. Visit them and see the hassle they live with every day. When you get an appreciation of their day-to-day issues and the range of suppliers and invoice formats they have to deal with, you will realize that the worse way to send invoices is on paper.
If your customers will accept electronic invoices, send them electronically. If they don’t, tell them they should and if you haven’t started to send invoices electronically, do yourself a favour, meet your customers half way and help them to pay you promptly.
This post was inspired by a great presentation that Philip King (@philipkingicm), CEO of the Institute of Credit Management gave at the Tungsten Insight event in February.
Pete Loughlin can be found on twitter @peteloughlin