Contrary to popular belief, addressing late payments does not have to be a negative process for business owners and accounting teams. With the proper preparation, planning, and professionalism, it’s a streamlined way to let customers know your expectations for payment and plan how they will meet those expectations.
If you often receive late or unpaid payments, don’t be discouraged initially because it’s widespread in a constantly changing economic market. The best thing you can do right now is stay calm and take immediate action without making the lack of payment personal. Follow these three tips to address late payments in a healthy and productive way.
1. Set up late fees
The best way to stop unwanted behavior from another B2B business is by setting healthy and pre-established boundaries. It’s important to clearly state your payment terms that explain late fees and penalties for regular late payments before the service begins. Make sure you gather a signature ensuring your client acknowledges the terms and conditions and digitally store the agreement in their client file for easy access.
When deciding what late fees to charge, the average fee in the B2B space is around 1%-2% interest monthly. However, be sure to set a late fee that makes the most sense for your current clientele and business structure.
2. Allow payment plans
Offering payment plans for your current B2B customers is a riskier financial decision that could potentially bring benefits. Your clientele will appreciate your flexibility, leading to more repeat customers and referrals. Although it may not seem profitable immediately, you’ll have a long-term competitive advantage over other companies that don’t offer solid payment plans.
On the contrary, you’ll want to set up financial requirements, deadlines, and late fees before starting a new payment plan to ensure customers can pay back their debt and don’t take advantage of you.
3. Utilize AP automation features
AP automation is key to reducing late payments because it allows invoices to be approved quicker and more efficiently, according to an article from PYMNTS. Plus, clients gain access to new features enabling them to schedule their payments, select a preferred payment method, and set up automatic payments with minimal human intervention.
If you need further help in creating a late payment plan, schedule an appointment with me by visiting my website or calling 617.843.5700. I look forward to strategizing with you so you can enjoy fast and easy perpetual savings and benefit from next-generation technology tools.
