Some people have poor financial management, which makes them incur a lot of debt. When you are running a business you are bound to be met with clients that aren’t on time with their payments.
Some clients pay a portion of the money in advance but end up delaying the rest. Not to mention that if a certain period of time passes, you can’t take legal action to collect your money. Here’s how to handle clients with a history of incurring a lot of debt.
Devise A Payment Plan
Some clients incur debts because they fail to plan their financials in the right way. Adequate planning is needed to predict what kind of finances are needed to run the business or to fund something specific.
Therefore, you can offer them assistance by helping them plan their payments properly. First of all, make a list of their debts- to make an effective payment strategy you have to have all the debts in front of you.
Second, rank the debt- some experts may recommend starting with the lowest amount first and then scaling up; this helps with creating momentum with payments. Nonetheless, the order doesn’t matter as long the payments are made. Moreover, advise them to focus on settling one debt at a time.
Additionally, your client has to understand how all the extra charges on their money work, so they can make an effective payment plan.
Requesting a Business Loan
Sometimes the only solution to pay off debts is to request a loan, whether it’s from a bank, a financial institution, or from an online lender.
The process of requesting a loan may sound tedious, but fortunately, the process of acquiring a business loan nowadays is much simpler than how it was before Seeing as how the business market in Singapore has been thriving, they have great and constructive plans in place when it comes to business-related loans.
The process of getting approval for a business loan in Singapore is expedited because they understand that whoever requests a loan they probably need the money as soon as possible. However, you can advise your client to use other means to request a business loan.
For example, they can get cash advance on either their credit or income. These loans could be short term or long term, it’s all according to their needs and financial situation.
Request Upfront Payment
Getting money upfront is always wise with clients who fail to fulfill payments on time. However, if your client won’t be able to pay the full amount in advance, then forge an agreement and allow them to pay a portion before, and then the rest after they receive the product or the service. Make sure the agreement is written and signed by both you and your client to ensure that the agreement would be honored.
Quick Invoices For Clients and Follow-ups
If you will offer credit for clients, then make sure to send them invoices as quickly as possible. Don’t delay it until the accounting department gets to it. When you provide your client with fast invoices you are giving them a timeline and ultimately a deadline for the payment.
Another advantage of quick invoices is that you are saving your clients from incurring late payment fees and more debt because they have a clear timeline that they have to follow. Moreover, if it happens that a client fails to pay after the deadline, you can follow up with them and remind them of the payments without being demanding.
Put Penalties on Late Payments
Penalties encourage clients to settle their debts quicker, because if the payment is delayed then the extra fees mean more debt. Therefore, a written agreement between you and the client should be made, the terms regarding the penalties for late payments should be included in that agreement. The agreement should clearly outline the deadline for the payments and the late payment fees. This agreement will give no room for misunderstandings when it comes to making payments and settling down invoices because the client will most likely want to avoid acquiring any more debt.
Reward Early Payments
If your client manages to settle their payments on time, give them a discount. It could be as small as 2%, but it’s enough to entice the client to pay on time because it’s a cost advantage, especially that they have other invoices they need to fulfill. The advantage of early discounts is that the cost is reduced and profit is maximized.
You build loyalty between you and your client by assisting them in managing their finances or providing them with solutions that make it easier for them to avoid incurring debt. Afterall the key takeaway is for you to retain your client, without causing a blow in your cash flow. Following these tips would create a positive relationship between you and your client.