Whether you’re a small business by nature or you’re a recent start-up, your time is your most precious resource. Spending time on developing your business processes and growing your company as a whole will be the priority for any business in a similar context. What you don’t want to be doing as a small business is chasing clients for late payments. Chasing customers for payment is both a hugely time consuming and costly job, taking your attention away from the running of your business and directing it to the client.
Spending time pursing customers will result in time and effort being wasted, which could be put to better use in other areas of the business. As a small business however, there are options you can consider in order to prevent your business falling into this scenario and how to best mitigate time lost if you do so happen to find yourself chasing a client.
The primary reason for a business having to chase a client for late payments is down to the payment methods they employ. A manual method of payment in which a client has to physically post a cheque or makes the payment themselves every month, hands them the ability not to make a payment on time. This added sense of leeway means that a customer has the opportunity to make a payment late. One method small businesses should seriously consider when evaluating how your company will take payments, is implementing the use of automated payments. Employing automated payments means the bank will automatically take payments out of a clients account on a specified date. There are several types of automated payment:
- Direct debit: This method requires a client to authorise your business to take regular payments from their account. As long as you give notice of the amounts and dates, you can automatically take varying amounts on different days, with their approval.
- Standing order: This method requires a client telling their bank to make regular payments to your businesses bank account. The regular payments are made at a set amount and frequency.
- Recurring card payments: Also known as automated card payments, this method involves a client authorising the business to take payment from their card by providing you with their card’s details.
With these methods in place, your business can be sure there are processes in place to automatically collect money from clients, freeing up time to turn your focus to more important parts of the business. It should be noted here that the power of cancelling the automated payment methods is in the hands of the client, as it is their account the money is taken from. Laying out your chosen process in a well-detailed business plan is the best way to ensure automatic payments are the standardised method of collecting payment throughout your company.
Over the course of running your business, there will inevitably be a time in which you find yourself chasing a customer for payment. There are best practices to take when ensuring you can get your client to pay the money they owe, and this lies with being consistent. Your first point of call is making sure the details you have received and have provided are the same for both you and the client.
If the details are correct, you must then be consistent in your chasing of payment. No one wants to spend time and effort chasing a client, but initially pestering a customer, and then stopping will undo all of the chasing you have previously done. Be steady and consistent in your approach, call at different times during the week and ensure you gather all information regarding your clients attempts of payment, for example what day they posted a cheque.
Establishing how you will take payment throughout your business should make up an important part of your business plan. If you would like help with writing a business plan, we would love to hear from you. Contact us online using the form on the right or call 01604 420 420.