Dean Kaplan, president of The Kaplan Group, provides insights on business debt collection and contract negotiations, as well as financial advice. In a recent article, he highlights common mistakes that businesses make when it comes to collecting payments from customers. One key mistake is neglecting credit checks, which can lead to extending credit to clients who may not be able to pay on time. This can ultimately impact cash flow and profitability.
Another mistake Kaplan points out is the lack of a written business agreement. Without a legal document outlining payment terms and procedures, it can be challenging to enforce timely payments. Having a written agreement helps build trust between businesses and clients by clearly defining expectations and consequences for late payments.
Kaplan also emphasizes the importance of identifying who approves invoices within a client’s organization. Without clarity on this matter, it can be difficult to address payment delays and negotiate solutions. It is crucial for businesses to specify the contact person responsible for approving payments in their business agreements.
Inaccurate or unclear billing statements can also contribute to delayed payments, according to Kaplan. Improving billing procedures and invoice formats can help minimize confusion for clients and ensure timely payments. Providing detailed and easy-to-read invoices can enhance customer satisfaction and streamline the payment process.
Offering multiple payment options to clients can also facilitate prompt payments, as it allows for flexibility and convenience. Kaplan suggests incentivizing timely payments with discounts or other rewards to encourage clients to settle their balances early. Taking action promptly on overdue accounts is essential, as time is of the essence when it comes to collecting past-due amounts.
Kaplan advises reaching out to clients immediately when payments are overdue, communicating through various channels and documenting all interactions. If efforts to collect payment are unsuccessful, businesses should consider involving a professional collections team. It is important to establish a clear procedure for handling delinquent accounts to increase the likelihood of recovering outstanding balances.
Overall, following best billing practices and addressing common mistakes in payment collection can help businesses maintain healthy cash flow, working capital, and long-term profitability. By implementing these strategies, businesses can establish strong relationships with clients, improve efficiency in payment processing, and mitigate financial risks.
