Multiple studies suggest that more than half of all invoices don’t get paid on time. This isn’t ideal for small businesses because they need payment certainty more than larger enterprises. Late payments can adversely affect supply chain relationships and cashflow. They can also increase financial risks. Meanwhile, pursuing debtors can take up a small business’s important resources.
Yet, data suggests that certain businesses are simply better at getting paid on time. Two nearly identical businesses in the same industry selling the same products can have different accounts receivable turnover ratios because of their collection practices.
At Summit A*R, we have over 23 years of experience in the debt collection industry. We have partnered with many businesses of various sizes and understand how late payments and lost revenue can be detrimental. As a collection agency for small businesses we also know that debt grows harder to recover with time. That’s why it’s important to understand some of the habits of small businesses that get paid by the due date:
#1 They’re Proactive
Businesses that don’t invoice on time usually get paid late. The most obvious reason for this is that it gives a customer less time to arrange payment. It also has a psychological impact. If your customer feels that getting paid isn’t a priority for you, then they’re less likely to take their obligations seriously.
Businesses that are proactive collect revenue faster. This means sending invoices on time, offering recurring billing, requiring a deposit, and offering early payment incentives such as extra services and discounts.
#2 They’re Organized
Your customer is less likely to pay if you’re disorganized. You should know what services were bought by which client, provide your services promptly, and stay up to date on account information. If your invoice is inaccurate or if you send the wrong invoice, then you’re going to face payment delays. Consistent mistakes could also delay future payments, as your customer is likely to examine later invoices under a magnifying glass.
Likewise, make it a priority for your employees to stay organized. Have group meetings to determine how your organization can minimize mistakes and improve efficiency. Remember, a single weak link can break the strongest chain.
#3 They’re Detail-Oriented
If your customer is shocked by how much you’ve invoiced them, then they’re unlikely to pay you on time. It’s important to give your customer an accurate estimate before you begin working for them. Help them understand the factors that may cause this estimate to vary. This way, if they ask for add-ons, they’ll know what to expect.
Include every relevant detail in the final invoice. Mention the due date and any potential late fees. If there are fewer details, a customer may feel the need to get in touch a few days later with questions, hence slowing down the payment process.
#4 They Take Advantage of Technology
Use invoicing tools, accounting software, and other professional resources to invoice quickly and more accurately. Also, try to go paperless. A shift to the cloud can speed up the accounting process with automatic payment reminders, recurring billing, and more.
Likewise, partner with digital payment portals to receive payments online. Customers that can immediately pay an invoice with their credit card, debit card, or bank will have less time to think twice about paying you on time.
Some businesses have moved away from cheques all together while others charge a handling fee. Cheques have the potential to get lost in the mail and can also take precious time to clear.
#5 They Have Shorter Payment Terms
Businesses that get paid faster than the rest have two-week payment terms instead of three to four. Even if the invoices go past due, they still get paid faster than they would with a standard one-month payment term.
#6 They Are Friendly yet Professional
Many businesses add a personal touch to their invoices to strengthen their relationships with their customer. Words like “thank you” and offers of free content can help. At the same time, they remain professional. Harassing a customer with multiple emails, phone calls, and text messages can be counterproductive.
These are some habits of a small business that gets paid on time. A small business also knows when to partner with a collection agency, and how to pick the right one. There are thousands of collection agencies that operate in the United States. While most are good businesses, some can use shady tactics.
This can be terrible for your business. An agency that threatens, harasses or misleads your customer will damage your valuable business relationships and your reputation. It may affect future business with the customer and hurt your ability to work with others.
Moreover, a collection agency that breaks the rules can also land you in trouble. Instead, partner with a consumer protection compliant debt collection agency like Summit A*R that understands the value of mutual respect. We treat debtors with dignity and respect thanks to our “P.H.D. Philosophy” (Preserve Human Dignity). We use a firm but friendly approach to debt collection.
We have a no-compliant policy that’s evidenced by our A+ rating from the Better Business Bureau (BBB), trained and licensed professionals with over a decade in the industry, and a high-quality skip-tracing department led by a private investigator. What’s more, we boast a recovery rate that’s twice that national average.
We partner with businesses of all sizes. No enterprise is too small to work with us. We don’t demand fees upfront or a certain number of accounts. We’re only paid after we recover your revenue.
We also offer transparency. You can follow the progress of your recovery through our fully HIPPA-complaint portal that’s available at all hours of the day, every day. You can check payments, download activity, and request reports with ease. Once your payment is recovered, it’s deposited into a state-regulated client trust account. The net amount is sent to you on the 10th of the following month.
Our friendly staff is available to address any concerns. Get your questions answered by reading our FAQ, requesting a callback, or calling us directly. Remember, the longer you wait, the less the chance of a successful recovery. So, get in touch today and get reunited with your hard-warned revenue in a cost-effective, efficient, and ethical manner.