Stay in Touch with Clients to Avoid Collections Delays
It pays to reach out to clients, vendors and other business partners before payment delays become a problem. Taking a proactive approach can help protect your bottom line and improve cash flow.
In a tough economy, you probably spend a lot of time analyzing your bottom line. But it’s not just yours that matters. If your clients are struggling financially, their troubles could become yours if they start delaying payments or failing to pay at all. It’s worthwhile to reach out and communicate regularly with clients, vendors and other business partners so you’re prepared for payment delays that could affect your cash flow.
The key to insulating your business from your clients’ troubles is catching them early. These four warning signs may indicate a time for action.
- Change in habits. A client who usually pays within 30 days but suddenly shifts to a 45- or 60-day billing cycle may be having trouble making ends meet.
- Late payments. Occasional tardy payments may be nothing to worry about, but multiple late payments may indicate cash flow troubles.
- Invoicing errors. Clients who regularly blame overdue balances on lost invoices or other accounting mishaps may be masking the underlying issue.
- Requests for help. Asking for a longer timeline to pay invoices is an unmistakable sign of financial trouble.
A Plan of Action
Consider your relationship with the client when determining how to react to clients’ financial woes. If you suspect the problems are only temporary, the situation may warrant a delicate touch to preserve the relationship. But if the outstanding invoice is substantial, it may require more perseverance. The following tips may help you get what you’re owed, diplomatically.
- Communicate. Develop a rapport with your accounts payable contacts and keep in touch about overdue invoices. A company with limited funds may be more likely to pay the vendors with which it has the strongest relationship.
- Be clear. When the language on the invoice matches the language in the signed contract, your customers can’t blame confusion over the bill for not paying on time.
- Make changes. If you generally bill clients after work is completed, consider making exceptions for those exhibiting signs of financial trouble. Charge a portion before beginning work, then bill the remainder at the conclusion.
- Negotiate. If work has already been completed, implementing a payment plan can cultivate good will with the client and ensure that you recoup at least some of your fees.
Strengthen Your Business
Having a well-diversified client base and taking steps to streamline your processes for accounts receivable can help you get paid faster. Amegy Bank’s online business banking can help you stay on top of your finances, while our First Data Merchant Services LLC[cite::2515::cite] give your customers a range of secure, convenient and reliable payment options. And a business loan or line of credit[cite::2149::cite] may be just what you need to expand your marketing efforts to win new clients. Learn more about how we can help by contacting your business banker.