Late payments. They are the bane of every small and medium-sized business, yet they are seemingly inescapable. What’s worse is that it hits the business owner two-fold: Not only does your business suffer financially due to slow- and no-pays, but also you run the risk of losing a customer if the situation isn’t handled with finesse and aplomb.
Even good and loyal customers can fall into the category of the late-paying customer from time to time, and you want to show them patience and empathy for what is hopefully a temporary setback for them, while at the same time protecting your business interests. Iron Mountain Janitorial Services offers a few pointers to balance positive customer relationships with effective late payment management.
Promise versus punishment
Your first order of business is to keep your emotions in check. When you offer goods and services in good faith, you understandably expect to be paid and it can seem like a betrayal when you don’t. However, particularly if this is a repeat customer, take time to consider what may be happening in their world right now:
- It may be a temporary and unforeseen setback
- You’re likely not the only person they owe
- They’re probably feeling pressure from all sides, so if you exert additional pressure, you’ll be just like “everyone else” asking for money
Instead, be the one they want to pay first. If they are already behind, offer to split up the amount owed into manageable, smaller payments at intervals that make sense for them, whether it’s a weekly payment, or half now, and half with the next bill. Waive any interest or late fees that you usually charge. Then, offer them a discount on their total monthly bill if they pay within a certain period of time going forward, such as in 15-20 days. Show them how much they can save on a recurring bill with this discount.
You can also create a customer loyalty program that awards them points for each dollar purchased. At the end of the month, they can use those points to apply a discount to their total bill. This can incentivize them to keep coming back. However, don’t use your loyalty program in isolation; Stamp Me notes that for long-term effectiveness you need to continue to build on your customer relations so that they are loyal to your business. Other businesses have loyalty programs, too, so you need to engender loyalty, not “buy” it.
Add some personal touches as well, to build on that brand loyalty. For example, as your customers opt-in to your loyalty program, ask for personal information such as their address, birthdays, and any other special dates. Even a simple customer relationship management, or CRM, system, can help remind you of these special dates for streamlined customer management.
Of course, as a business owner, there are many lessons to be learned. From the startup phase through the coming months and years of running a successful enterprise, all of your customer retention efforts need to be performed simultaneously with closely monitoring your financial health. Most business software, even for smaller businesses, can give you monthly projections of your accounts payable and accounts receivable. Having this information early gives you time to negotiate your own vendor payment terms and implement other cash flow strategies.
Getting your invoices out in a timely manner is of course key to getting paid expeditiously. This is where an accounting platform with software that allows you to run automated batch invoices will be your most important financial tool – along with financial insights, profitability projections and automated workflows. It saves you both time and money – two critical components of running a successful business.
Finally, give your customers multiple ways to pay. There are several online apps you can use, and some common ones integrate with popular accounting programs. You can also offer a discount for cash-paying customers.
A better balance is better business
Remember that as Better Explained points out, the 80/20 rule (80% of your business comes from 20% of your customers) isn’t absolute, but keeping your current customers happy, even when they’re not paying on time, can provide you with long-term benefits that will outlive whatever setbacks they are currently experiencing. Your efforts to keep them happy while staying liquid financially may seem more difficult than balancing your books, but in many cases, you’ll find that it’s a doable and rewarding balancing act.
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Iron Mountain Janitorial Services helps your business preserve its image by providing superb cleaning services while becoming the best cleaning service in San Antonio and surrounding communities. Reach out to us today! (210) 537-4665