When you run a business-to-business (B2B) operation, one thing you quickly learn is that consumers aren’t the only debtors who can be slow to pay their bills. Some businesses seem to think that due dates on the invoices they receive from their suppliers and contractors are highly flexible (if not optional).
What can you do to encourage another business to pay up? A few options worth considering include the following.
Make your payment terms crystal clear
Clearly outline payment terms in contracts and invoices. Specify due dates, late payment penalties and any other relevant terms. Make sure both parties understand and agree to these terms before entering into any business transaction.
Consider the “carrot” over the stick
Offer early payment discounts as an incentive. For example, you can provide a small percentage discount for payments made within a specified period, such as 10 days. This can motivate clients to pay promptly to take advantage of the discount.
Be reasonably flexible about payment options
Provide various payment options to make it convenient for clients to settle their invoices. This can include online payments, credit card payments or automated clearing house (ACH) transfers. You can even allow your clients to make partial payments (which can also build goodwill).
Don’t be afraid to brandish the “stick”
Communicate the consequences of late payments in your terms and conditions in plain terms. Implementing late payment penalties can act as a deterrent and encourage clients to settle their invoices promptly.
It usually takes a combination of strategies to encourage other businesses to pay their due bills. Most of the time, these tactics will be successful. When they’re not, however, you may need to explore additional debt collection options and seek legal guidance accordingly.