This comprehensive list offers 12 helpful tips to collect payment from your customers. Read on to learn how easy and convenient SMS payments can be!
How to Collect Payment From Customers: 12 Tips
As you know, the ability to quickly collect payment is vital for every business. And you expect to be paid for your goods and services. But sometimes, your customers may be late with their payments or just not pay at all.
There are various strategies you can use to collect payments from customers in these situations. These methods will help you maintain your cash flow and prevent the need to hire a collection agency.
What are payment terms?
One essential part of collecting payment is to ensure that you have clear payment terms. Payment terms outline when and how you expect to be paid. They can also include information on late fees and more.
Establishing these terms ensures that your clients know when they need to pay and how they will be able to do so. They also give you some legal footing when it comes to charging late fees or collecting overdue payments.
Why don’t customers pay?
There are many potential reasons that a customer might not meet your payment expectations. A customer with late payments is likely overdue for a combination of reasons. You’ve probably come across some of these explanations before:
- You only accept payments while they are working.
- They didn’t receive a mailed invoice.
- They lost the invoice.
- Your payment process is inconvenient.
- You don’t accept the payment method they want.
- They forgot to send money.
- They didn’t read the due date.
- They have no incentive to pay on time (i.e., you don’t charge late fees or withhold deliverables).
- The invoice is for more than they expected.
- A financial issue came up, and they can’t afford to pay.
- They don’t agree with the invoice or the quality of services/products.
- You forgave a late invoice once, and now they expect you to do it again.
With this background in mind, the following tips outline how to collect payment from customers–even in difficult circumstances.
How to Collect Payments From Customers: 12 Effective Tips
1. Set expectations.
Start by setting clear expectations about your payment system, including the timing of the payments. This should all be in your payment terms.
Let the customer know when you will be requesting the payments so they know when to look for the invoice. Make sure they also know when you expect to receive payment, which can prevent a customer from claiming they didn’t when you needed to be paid.
2. Decide when payment is due.
Some companies expect payment in advance or at the time of the first service. Maybe you expect payment 15 or 30 days after sending the invoice. Perhaps you expect half of the payment in advance and the other half when the service is completed. Requiring payments for work upfront is an excellent strategy for reducing late invoices and getting paid faster.
Decide what makes sense for your business and customers and be consistent.
3. Send payment notifications in a convenient way.
One of the most important tips to help you collect payment from customers is to make it super convenient for them to pay. For example, tools such as text-to-pay help you work to meet your customers’ preferences and offer a better customer experience at checkout.
Text-to-Pay
Text-to-pay is easily among the most convenient methods your customers can use to pay. It can work with a full range of payment methods including credit cards, Google Pay, and Apple Pay.
You simply text your customers a link to your professional invoice with text-to-pay. From here, they pay via their phone. Because they click the link you send, they won’t need to be concerned about online fraud.
Invoices
Alongside payment options, you also want to offer convenient options for invoicing. For example, make sure that you can send invoices via text and email in addition to mailing them. As always, the invoices themselves should also appear professional and have clear instructions on them.
Phone Calls
Traditionally, one convenient option for customers was to accept payment over the phone. While most customers today prefer a method that doesn’t involve calling, such as text-to-pay, some still prefer this method. That is particularly true for older generations of customers.
4. Send the invoice promptly.
The timing of when you send an invoice can have a significant impact on how promptly your customers pay–or whether they pay at all.
The fact is, sending an invoice earlier allows them to pay you earlier. (After all, your customers can’t pay invoices if you haven’t sent them.)
When you send an invoice promptly, your products or services are also still fresh on the client’s mind. In other words, they remember that you delivered a product or service they owe you money for. When you wait too long, they can forget about receiving your product or service or think they must have paid for it by then. Both of these situations can lead to them ignoring your future invoices.
5. Accept the payment method they want.
Another vital tip to get paid faster is to make sure you accept the payment method your customers want to use. The methods you can take will depend on your payment processing, but you should always consider expanding if necessary.
We already mentioned credit cards, Apple Pay, and Google Pay for in person and online payments. But think about other methods customers may want to use, such as ACH and eCheck. Remember, if you’re unsure, you can always do a survey.
6. Follow up.
After sending the initial invoice, be sure to follow up if your client does not promptly send money. In fact, you want to follow up with customers after they buy a product or receive a service anyway. Remember that following up with them will help you ensure that your customers are satisfied. You’ll also learn about any potential issues early enough to correct them.
Following up with your customers helps you build a strong relationship with them–something all local business owners strive for. This relationship could boost customer loyalty and potential referrals.
7. Start by sending a reminder.
In addition to a general follow-up asking for feedback, send your clients a reminder letter or text after the invoice. Send the first reminder early enough that they still have time to pay by the due date. This helps you prevent late payments and unpaid invoices. As always, keep things professional without being too pushy.
If they still miss the due date, send another professional reminder. At this point, you can mention the payment terms they agreed to.
8. Don’t threaten the client or get angry.
No matter how angry you feel about clients not paying on time, don’t threaten them or get angry. This can only make things worse and might even cause legal trouble.
Even if there are no legal consequences, getting angry with your clients or threatening them can significantly hurt your relationship with them. Simply put, they’ll be much less likely to hire you in the future or refer you. Instead, stick to incentives and friendly payment reminders via your invoice system.
9. But let them know you are serious.
While you don’t want to threaten your clients, you should let them know you are serious. Remember that if you give a client an extension on their payment one time, they may come to expect that again in the future. They may also ask for an even larger extension in the future.
Moral of the story: Not collecting payment on time from a client once can lead to a trend in future invoices.
To make your reminder about money owed feel friendlier, small business owners can include a note encouraging clients to contact them if they can’t afford the full invoice. Let clients know that you can accept a partial payment or a payment plan when necessary.
10. Use collection agencies when necessary.
In the worst-case scenario, you can always turn to collection agencies. They will collect the debt for you, but they’ll charge you for doing so. This, unfortunately, will cut into your profits–another reason a collection agency should be your last resort.
Another last resort option is legal action, where you take your client to small claims court. However, any legal action will come with legal fees that also eat into your profits. Candidly, you won’t be able to expect your full payment with these methods.
11. Offer personalized invoice schedules.
Your customers are all unique–and so are their finances. Offering ultimate convenience to your customers doesn’t only mean using any payment method they want. It also means working with them, one-on-one, to determine an invoice schedule that works for them and their individual needs. Customers who work with you to determine their invoice schedule (within a set framework and bounds of reason, of course) are more likely to pay on time.
12. Contact other people at the company.
Why should you be doing all the work? If things get dire, and perhaps even before they do, involve other people at the business. If you’re not getting paid because of a simple bottleneck issue or because something has happened to your contact, creating a net of people with transparency into the situation will ensure that you’re paid quickly and on time–regardless of who you talk to when the bill comes due.
Contact Free Ways to Collect Payments From Users
Even after implementing the tips we’ve covered, collecting payment is a challenging and uncomfortable endeavor. Another way to collect payments easily is through contactless payment tools.
1. Text-to-Pay
As we mentioned, text-to-pay is an up-and-coming payment method that can make your life and the lives of your customers a whole lot easier. Sometimes called SMS payment, this method allows you to send and collect payments via text message (customers receive a short link that takes them to an online page with all your payment options). Text-to-pay is one of the fastest growing forms of payment and appeals particularly to younger consumers.
2. Payments On-the-Go
With a mobile POS system like Podium’s cloud-based card readers, you can process customer payments quickly while gathering key data on your customers’ purchasing behavior. These payment processors allow customers to tap, swipe, insert, or text, helping you capture every single payment collected with every single method in one secure place.
3. ACH Payments
Using the ACH (Automated Clearing House) network allows you to process payments via bank-to-bank transfer. Cons? Transfers often take one to three business days, and typically there’s a 1% transaction fee (capped at $10). Pros? This fee is still much lower than credit card transaction fees, making ACH a go to for high-end, high-quality local businesses that can collect bank account information.
The Perfect Payment and Growth Solution
Having a convenient and effective payment collection system is essential to your business’s cash flow and overall profits. And we’re here to help.
Podium Payments is an all-in-one solution that helps businesses grow and collect payments easily via card reader and text. With Podium’s suite of tools, you can capture leads via Webchat, access tried and true texting templates for your campaigns, and take your messaging to a new level. Try it free today. (While you’re at it, check out our free Google review link generator!)
