4 Strategies for Getting Paid Faster

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4 Strategies for Getting Paid Faster
Image credit: REUTERS | Mike Segar
Magazine Contributor
4 min read

This story appears in the February 2015 issue of Entrepreneur. Subscribe »

Q: How can I get customers to pay faster? 

A: I know it’s no fun managing the weeks or even months that pass between moving your product out the door and waiting for your customers to pay you. To help shrink that window of time, try these strategies that I’ve collected and refined over the course of my career. 

Much of this is common sense, but since no two companies’ billing and payment structures are exactly alike, confusion often reigns. And where there’s confusion, the customer finds an excuse not to pay.  

Invoice correctly and quickly.

•  Make sure you receive any and all payment instructions when you get an order, then follow them to the letter. This includes information such as a purchase order number and the accounts payable person’s full contact information.

•  Invoice the day you deliver. I work with my clients to ensure that each day’s business sees a corresponding invoice sent out the same day. 

•  Send the invoice electronically, and follow up with a hard copy only if the customer requires it. 

•  Highlight the total amount due, the date it is due, the name that should be on the check and where to send it. 

•  Never show an aging amount at the bottom of the invoice (“60 days past due; 90 days past due”), as it tends to encourage a delinquent customer to pay the oldest amount instead of the entire amount due.

Encourage faster payment.

•  Set up your business to accept credit cards or electronic bank transfers. 

•  Offer discounts for early payment, especially for large invoices. Offering up to 3 percent off for payment 10 days from the invoice date will typically do the trick.

Be relentless with follow-up. 

•  For invoices sent electronically, check with the customer the next day to ensure they received it.

•  Two weeks before the payment is due, contact the customer’s accounts payable person and ask if they have everything they need to get approval for payment. If they don’t, immediately hunt down and deliver what is needed. 

•  One week before payment is due, follow up to ask whether the payment has been approved. If yes, find out when and how the payment will be made. 

•  If the customer misses the due date, call the very next day to find out when payment will be made. 

Manage your performance.

•  Your accounting system should be able to generate summary and detailed accounts receivable reports on demand. I like to run the detailed reports listing all transactions by due date, amount and customer, sorted from highest to lowest. This shows me where I can get the most cash quickly by going after older, larger or more important amounts.

•  Create written policies and procedures stating who does what and when—e.g., alerting the sales staff that their commissions apply only to collected revenue.

•  Apply ample resources to collections. If your receptionist is the only one following up on payments, I guarantee that you’re waiting too long to collect your AR. You need someone who has this as a primary responsibility and is compensated for measurable results.

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