Get Paid Faster by Your Customers
Dealing with slow paying customers, especially as a wholesaler-distributor, is frustrating and can really throw off the whole month. When customers don’t pay on time, there are implications on your cash flow and the other transactions you make as a business. A key component of successful B2B distribution is making sure you get paid as much and as quickly as possible. Slow paying customers are a deterrent to your business’s financial growth. Luckily, Cortera knows the name of the game and is here to offer industry insight, best practices, and the top 5 tips to help you collect from slow paying customers.
Tip #1 – Be Selective
The best way to deal with slow paying customers is to not deal with them at all. Invest in the right information that will identify the good paying customers and help you avoid the bad ones. Pulling a business credit report is a great way to identify potential risk factors that will aid you in your decision. If a certain company has a history of paying late, take that into serious considering before extending credit. While the purchase amount may seem like a good deal in the beginning, having to wait for one late payment to come in can have more negative long-term effects than what the initial sale is worth.
Tip #2 – Invoice Immediately
The longer it takes to receive an invoice, the longer it is going to take that company to pay. If invoices are sent late or at the last minute, the owing company has more lee-way to push a payment date beyond set terms. One option in avoiding this is to set up automated billing. Similar to automatic credit card payments, this type of billing structure will ensure that your invoice is sent on time without you needing to remember. Another option is to use your commercial credit bureau as leverage. Companies are more likely to pay their suppliers on time if they know they are being reported to a business credit bureau.
Tip #3 – Emphasize Payment Terms
It’s easy for a company to claim that they “missed” or “didn’t fully understand” payment terms. This often happens within the commercial credit industry, which can lead to payments being pushed far beyond set terms. Be sure to clearly specify what the details of your terms are right from the beginning, and re-enforce them throughout the transaction process. As long as the customer understands the terms, they’ll have no excuse for missing due dates or paying excessively late.
Tip #4 – Monitor Details of Your A/R
Busy credit managers may consider A/R monitoring a tedious task that takes up too much valuable time. It was a manual process that took too much time for what it was worth. Thanks to recent advances in technology, Cortera’s Pulse platform proactively keeps you aware of any significant changes via an automated, cloud-based system. With Pulse you’ll receive a daily email alert, sent right to your inbox, with information on predictive risk scores, significant changes in payment behavior, financial news, bankruptcy filings, tax liens, civil judgments and peer payments. This type of credit risk monitoring tool will allow you to collect from slow paying customers before it’s too late.
Tip #5 – Send to Collections
In the worst case scenario, a slow paying customer will become a no-paying customer and you’ll have to send them to collections. Before choosing a collections agency, look to your business information provider and see if they partner with or recommend anyone in particular.
Have you used any of these tips to collect from slow paying customers? Let us know in the comments section below! To get more information, click here.