One of the most important things that every business person should always take care of is cash flow. It should be stable, and the flow of money into the business should be consistent. You can only achieve such equilibrium if you have diligent clients. But you have to acknowledge the fact that not all clients can stand by their commitment. This can be a bit of a problem on your end.
You might not have considered this problem in the early stages of your business. Perhaps all you worked on was thinking about starting and expanding your physical therapy business or restaurant. But now that you’re dealing with it, some things can help you out. Here are some of them:
Be detailed with your contracts
Whether big or small, any business transaction should have a contract that both parties have mutually agreed upon. Stipulate in the contract whether the deadline will be immovable or not. When the client signs the contract, it is understood that they know the repercussions of the late payment. You need to make sure that the deadline is also feasible does not put your clients in a tight spot. To make sure that there are no loopholes in the contract, consider hiring a corporate lawyer.
Have incentives and penalties in place
Since you are dealing with contracts, you might as well include the possible penalties and incentives that your clients might receive. For instance, you can state in your contract that your client might receive a 5% discount if they pay the price whole within a specific time period. Similarly, you may impose a similar rate of penalty in case they exceed their grace period. When it comes to penalties, you must be careful about implementing them, as handling it these matters the wrong way may result in conflicts.
Follow up but don’t be annoying
You have dealt with late-paying clients in the past, and sometimes, these clients do repeat business with you. You know that following up can be time-consuming, and it can sidetrack you from more important tasks you have in hand. However, know that following up is necessary. If you don’t want to be bothered by this activity, why not automate it? Some accounting applications have a function that automates the sending of invoices and follow-ups.
Legal action might be necessary
You don’t want to reach this point, but this is a must, especially if you are dealing with losses worth thousands and millions of dollars. If you have a contract that is duly signed by both parties, you can take legal action against the client. Just make sure that your documentation is accurate and that the records are updated. A competent business lawyer will also help.
What to do next?
Now, there are some actions that you can take to avoid this problem in the future. For instance, you can make your payment terms more flexible. You can open up other payment channels, especially for clients that have accessibility issues. More importantly, always ask for a down payment.