If you run an established business that relies on ongoing payments or buy-now-pay-later fees, there’s a high chance that you’ve already had to deal with your fair share of late paying customers.
It’s impossible to get all customers to pay on time. However, you can take measures to greatly minimize the amount of late payments you have to deal with. Below are just 5 tricks that could help reduce the amount of late paying customers you have to deal with.
Credit check your customers
Start by considering your merchant onboarding process. Do you vet your customers? If your customers are paying installments of over $50 per month, it could be wise to run a credit check. A credit check can allow you to check a customer’s credit score to give you an idea of how good they are at keeping on top of payments. This could allow you to reject customers who may be too risky. While this does mean potentially losing out on customers, it could reduce the headache of dealing with late-paying customers.
Send automated reminders
Sometimes customers genuinely forget to pay bills and invoices. Sending payment reminders a few days before their payment is due could encourage them to make the payment. Some accounting software programs have in-built features that allow you to generate bills and invoices and automatically send out reminders a few days before the deadline so that you don’t have to remember to manually send these reminders.
Introduce late payment penalties
Late payment penalties could discourage some customers from missing payments. This could include penalties like extra fees, denial from using certain services or even sending out debt recovery agents (after several missed payments or several months without paying). These penalties will need to be written into the customer contract. You won’t be able to dish out these penalties to existing customers, unless you encourage customers to sign a new contract with these late payment penalties included.
Adopt early payment perks
An opposite approach that could be worth taking with invoices is early payment perks. This could involve offering discounts to customers that pay a certain amount of days early instead of waiting until the deadline. In the case of subscriptions, you could consider offering discounts or other perks to customers who have consistently paid on time within a certain period. This encourages them to keep up with payments.
Accept a range of payment types
Consider the ways in which you allow customers to pay you. When it comes to large one-off payments, consider whether it’s worth working with a finance company to offer the option of paying in installments. You still get the full amount upfront – the finance company pays you and then collects the money from the customer in installments. Make sure that you also accept credit card payments and not just debit card payments. Credit cards allow customers to borrow money for purchases and are much less likely to be declined. Of course, there are additional fees to consider when accepting credit cards.
