In times of economic downturn, it is crucial for your company to implement strategies that ensure timely payments from customers.
During economic downturns, the likelihood of delayed payments or customers struggling to make ends meet increases significantly. This can result in unexpected shortfalls, leaving your business with less cash than anticipated simply because payments are not arriving on schedule.
According to Forbes, the average credit card debt per borrower in 2023 was $6 360, approximately 10 percent higher than 2022. This indicates that numerous individuals and businesses continue to spend beyond their means.
To avoid payment difficulties yourself, it is advisable to have good liquidity in the company. Good liquidity acts as a safety net when the economy is down, ensuring that your business can meet its financial obligations.
The liquidity of your business shows your ability to pay upcoming bills and expenses. This includes fixed costs such as rent and employee salaries, as well as one-time purchases like new equipment or unforeseen expenses.
How to ensure timely payments
Ensuring timely payments is crucial for maintaining healthy cash flow and financial stability. Here are some strategies to help you get paid on time:
1. Prompt invoicing
The most important step is to send out invoices immediately after delivering a product or service. Inform your customer in advance that invoices will be sent promptly upon delivery. This clear communication helps set expectations and strengthens the customer relationship, which is vital regardless of financial circumstances.
Create free invoices with Conta
Say goodbye to the hassle of creating invoices!
Conta streamlines the process, allowing you to breeze through it in under 2 minutes. Just input customer details, along with product and price information, and send your professional invoice swiftly.
Sign up – it’s free!
Delaying invoice issuance by several weeks increases the risk that the customer may not be prepared to pay right away. During economic downturns, both businesses and individual customers may find it more challenging to make timely payments. Therefore, make it a standard practice to issue invoices as soon as the product or service is delivered.
2. Handling overdue payments
Even with good communication and prompt invoicing, payments may sometimes be delayed. Customers might forget about the invoice or may not have the funds to pay on time. If the due date passes without payment, you have several options:
- Send a reminder: Politely remind the customer of the outstanding payment.
- Reissue the invoice: Send the invoice again in case it was overlooked.
- Debt collection: If necessary, consider sending the invoice to a debt collection agency.
Overcoming the discomfort of reminders and debt collection
It’s common to feel uneasy about sending payment reminders or escalating to debt collection. However, it’s essential to reframe this discomfort. Selling goods or services is a form of bartering – you provide value, and in return, the customer pays.
By sending a reminder or initiating debt collection, you are simply ensuring that the agreed exchange is completed. Remember, if you failed to deliver the agreed-upon service or product, your customer would likely raise a complaint. Just as they hold you accountable, you have the right to expect timely payment for your work.
Effective communication, prompt invoicing, and a proactive approach to overdue payments are key to maintaining a healthy cash flow and ensuring that you are compensated for your services.
Create invoices for free
Running a business can be challenging, especially during economic downturns. At Conta, we understand the pressure of managing cash flow and ensuring timely payments. That’s why we’ve made our invoicing software completely free of charge. With Conta, sending invoices has never been easier or more efficient.
- Completely Free: Create your FREE account today and start sending invoices at no cost.
- User-Friendly: Our software streamlines the invoicing process, allowing you to create and send professional invoices in under 2 minutes. Simply input customer details, product information, and pricing, and your invoice is ready to go.
- Trusted by many: Conta is trusted by over 60,000 businesses for efficient and hassle-free invoicing.
- Highly rated: Our software boasts a 4.5 out of 5-star rating on Google, reflecting our commitment to quality and user satisfaction.
