Businesses struggle if their customers do not pay one time since they end up without the money they need for critical business processes. Getting customers to pay on time can be challenging, especially if a business has one or two who never do. Fortunately, there are several strategies businesses can put in place to alleviate these issues. This article focuses on some of the things that businesses can do to ensure faster payments to reduce cash flow issues, reduce stress levels and ensure profitability.
Prepare Written Agreements
Written agreements that outline payment terms, dates, and other details are crucial because they let everyone know what is expected of them. The business knows what goods or services it is expected to provide, and the client knows what is expected of them in terms of payments.
The business should sit down with its clients to explain the payment agreement and to be as clear as possible within the document. Being verbose is much better in this instance than being vague.
Accept ACH Payments
The ACH network is a popular system for sending money between bank accounts. It involves various parties but for the sake of simplicity, the most relevant parties are the receiver and the originator with the ACH network sitting between the two.
The originator is a business or customer who initiates a transaction into the ACH system while the receiver is the consumer, entity, or business, that has authorized the originator to initiate an ACH entry to the account of the receiver. The originator can debit or credit the receiver’s account while the recipient can also do the same.
A business can request a payment (initiate a transaction) through the ACH network and the client can authorize a debit from their account. Both steps make the system secure because only the two parties involved have access to the process.
Businesses can also request batch payments from multiple clients. To do this, they use a Nacha file that outlines all transactions included in a batch. The Nacha file includes a set of instructions and acts as a trigger for ACH payments as soon as it is uploaded to a bank’s portal.
To ensure ACH transfers run smoothly, businesses must ensure they use the right Nacha file format. There are different formats, and the file format can vary between banks so businesses have to be careful to use the correct Nacha file format.
Have a Regular Payment Schedule
Set a regular payment schedule with your clients and stick to it. If you send invoices on the first and 15th of each month, keep it consistent so your clients know to expect an invoice on these dates.
Doing so not only helps your cash flow, but also helps your clients better organize things on their end as they always know when payments are expected.
In a business world where keeping a positive cash flow is becoming more challenging, businesses have to find ways to make receiving payments easier and faster. Putting written agreements in place to manage expectations, finding faster and more convenient payment options as well as keeping a schedule will all help.