Dealing With Slow Paying Commercial Customers

Slow paying customers can drain your company's resources and create a serious drag on your company's cash flow. In an ideal world, the best way to avoid slow paying customers is not to sign them on in the first place. But in reality things are never that simple, and especially nowadays, even large corporations also pay their invoices slowly. It's just how things work in the current economy so it helps to have a plan to del with slow paying clients.

With this in mind - what is the best way to deal with slow paying customers? In reality, there is no best way. Rather, there are a number of steps you can take to make sure you get good customers with solid payment records. If you follow these steps diligently you will minimize the chances that you will have problems from slow paying customers.

There are two things that you can before singing on a customer that will reduce the likelihood of having payment problems. First, when you work with clients you should always have an attorney written contract that outlines all the critical points of the sale, including the payment terms and the product/service acceptance criteria. This is critical because it puts all expectations in writing and gives both parties an opportunity to measure performance. Second, you should only extend payment terms to commercial customers that have a solid payment track record. To do this you will need to check your client's commercial credit or references. Dun & Bradstreet and Experian both produce well respected business credit reports that are available online.

The next step is to manage your receivables properly. There should be a dedicated person that calls the customer shortly after the sale to make sure that they are happy with the product or service. This will help you identify potential disputes so you can resolve them quickly. And If the invoice remains unpaid after the due date, be sure to call the customer promptly to check on the status. However, be mindful of how often you call the customer since calling too often can cause problems. Lastly, you should always be respectful, polite and professional with all customer interactions.

However, there are times when you follow all the right steps and customers still pay slowly. This can create a cash flow problem for your company. In that case, you should consider using invoice factoring to accelerate the payment of your invoices. Factoring is a form of business financing in which a funding company, called a factoring company, advances funds against your slow paying invoices from credit worthy commercial customers. This provides you the needed funds to operate your business and relieves the pressures created by slow paying customers.

One of the advantages of factoring is that it's much easier - and faster - to obtain than conventional business financing. Since factoring companies use your invoices as collateral - it's critical that you work with credit worthy customers. Aside from this, your company should be free of legal and tax problems. Most factoring lines can be implemented in a couple weeks - which is comparatively fast. these Teatures make invoice factoring an ideal solution for growing firms the have good, but slow paying, customers.