Slow-paying customers can gradually bring your business to a grinding halt, preventing you from taking on new projects and covering your day-to-day operating costs. It is extremely important, then, to bring in payments for work as quickly as possible in order to minimize your cash flow gap.

Employing the five suggestions below can help you speed up customer collections and keep your own company on track.

  1. Work with reputable customers. Use credit and background checks to establish a strong comfort level with your customers and forestall any major issues. Understanding how their business works and creating a foundation of trust will open the lines of communication and make your collections efforts easier down the road. Bonus: Periodically review your customers’ credit situations, especially if they dramatically increase or decrease their business with you. You can use a service like Cortera to monitor and report on their overall payment history.
  2. Create a techsavvy and consistent collections process. Following the same procedures to collect from your customers will make it easier on you and your payers. Get in a regular habit, such as an email or phone call to follow up on unpaid invoices, and include penalties and a re-invoicing process to encourage payment. Technology such as billing software and reminder systems can streamline this process so you work smarter – not harder.
  3. Send out your bills right away. The faster your customer receives their invoice, the faster you can expect to get paid. Send the invoice out the same day as a product shipment (or put it in the shipment), or email it to your customer as soon as work is completed with a follow-up copy in the mail.
  4. Maintain clear payment terms and communicate them to your customers. Make sure that your customers understand their payment responsibilities before you provide a product or service to them. Balance firm requirements (i.e. payment in 30 days) with incentives such as discounts for early payment to encourage your customers to honor the terms. Bonus: Use a credit card processing service and keep a customer card on file with authorization to charge when a new invoice is created, or on a set date each month.
  5. Turn your receivables into cash you can use. Unpaid receivables are nothing more than a line on your balance sheet – they cannot pay your bills, purchase supplies, or compensate your employees. Convert those receivables into ready cash with accounts receivable factoring, which will give you an immediate advance that you can use to cover your expenses without creating new debt.

Factor Finders works with a nationwide network of accounts receivable factoring companies that can customize a program to meet your business needs. Contact us today to learn more about accounts receivable factoring and receive a competitive proposal!