When a company delivers goods and services to customers, it often requests the customer pay prior to delivery or when the goods or services are delivered. Unfortunately, every customer will not agree to these terms. It is most common for goods and services to be purchased on credit or on term agreements to pay in the near future. When trying to increase sales, management must weigh the trade-offs and take precautions to protect the company.

The risk of non-payment for the provided goods or services increases when credit is involved. If customers fail to make the necessary payments, it can negatively affect the company's cash flow. Fortunately, there are safety measures you can utilize to help eliminate this risk.

Establish credit terms

Credit terms are crucial for business-to-business trading. When credit term information is not provided, customers assume they can pay off their items whenever it is convenient rather than when the payment is truly due. Providing an invoice that clearly states when the payment is due for settlement can help reduce risk and increase cash flow. Surprisingly, many companies forget to include this simple, but important, information and send invoices lacking critical credit terms.

Provide a detailed invoice

After  goods or services are supplied, immediately presenting an accurate invoice to the customer can help a company avoid non-payment.In addition to the credit terms, the invoice should clearly state what items were supplied, when they were supplied and where they were delivered.

Follow up with customers

Get in the routine of calling your customers a few days after you send an invoice. Make sure they received the invoice and ask if they are pleased with quality or quantity of the product or service. If  services are being provided to a large company, check to see if the invoice was accepted and submitted to the accounts payable department for payment on the due date. In some cases, you may consider recording the collection conversations to prevent discrepancies.

Continue to follow up

Connecting with your customers should not stop after they receive the invoiced items. Communication with buyers should continue until all goods or services are paid for. Invoices that are still outstanding 60 days after the invoice date can be difficult to collect if customer interaction has ended. After calling to confirm that the delivery was received, the next call or email should be right before the invoice is due for payment. Use this opportunity to make sure your customer is still satisfied and to verify that the payment will be processed soon.

When discussing payment with the customer, ask them what date they plan to send the next check. If the money is not received on that date, contact them once again. Remember to record dates of conversations and commitments or any excuses given for non-payment.

Address intentional delays and tactics

Even though the economy is improving, some companies continue to withhold payment until it is requested. If they are avoiding payments to other companies, you want to be the first business to approach them while their pockets aren't empty. Some customers may  utilize intentional delaying tactics to stretch due dates in order to conserve money. If you sense a customer is trying to employ such tactics, inquire as to who approves invoices for payment and follow up directly with this person. In order to make payments easier and less avoidable, consider accepting various payment options. These can include checks, electronic transfers, wire payments or credit cards. If certain customers are notorious for late payments, it is a good idea to request payment upfront to avoid the situation entirely.

While these steps may take some effort, they are essential for avoiding cash flow challenges. These practices also demonstrate your commitment to protecting your business and its future. Incorporating  precautions into your daily business routine can help you keep the company's doors open and act as fuel to business growth.