Payment management is one of the most essential segments of any business. Finances are the reason people venture into business in the first place, and regardless of how great a company is, if it is unable to pay its bills on time, it will quickly go under.
Despite this necessity for timely payments, there is a lot of room for improvement when it comes to payment management. Whether you are looking to speed up the process or slow down the rate at which you lose money due to penalties and interest rates, implementing some changes can make all the difference – especially with key points to address. Here are six things that every business should keep in mind when working to improve their overall payment management strategy.
Know your budget limits
The number one way to ensure that you never find yourself delayed with payment again is to set strict limits on how much you can afford to spend. A great way to easily track your expenses is through this free invoice generator. It will provide you with easy tracking and calculating the expenses. The first step towards making this happen is to determine the budget you have for paying bills each month. After doing this, you must take another portion of your monthly profits and set it aside as a reserve fund. This is the money that will be used to pay any last-minute or emergency expenses that might come up due to outside forces – such as an increase in rent after signing a new lease agreement, needing temporary staff because of turnover, or unexpected equipment repair.
As soon as you can estimate your monthly expenditures, make sure there is always at least 10% more than what your expenditures are set aside for emergencies. This way, even if something goes wrong, you will still have enough to meet your needs and settle any issues that may arise.
Organize your payment plan
One of the best ways to ensure that you never get delayed on payments again is to create a plan for how you are going to go about paying off what you owe in full, by when. There are many different types of payment plans companies might implement, but an ideal one would be to divide up all open invoices into four or five separate categories with defined due dates. This way, they will know exactly what is due when they come around each month – even if they have several bills all arriving within the same time frame.
Depending on your contracted expenditures, find the time to research the market regarding the services your company is paying for. If you are coming across some concerns or just want to switch providers, it would be better to conduct this research on the front end rather than waiting until something goes wrong.
Use an automated payment system
Receiving an invoice in the mail is not always cause for alarm – especially if you receive them regularly. However, it’s still best to keep track of what invoices come when and make sure that they get paid on time. One way to do this is by using an automated payment system that can work alongside your checking account for automatic bill pay. This saves money since there is no need to hire someone who will manually process each payment, and ensures that there are no lost payments due to human error.
There are many benefits to using an automated payment system, such as reducing the chances of human error and saving time. Another big benefit is that you can often negotiate a lower interest rate when you set up an automated payment plan with your creditor. This is because they know that you are serious about paying off your debt and are not likely to miss any payments.
However, there can be some downsides to using an automated payment system as well. One downside is that if something goes wrong with the system – like your internet service going out – you could end up missing a payment and getting charged a late fee. Additionally, if you have a lot of debt, it might be difficult to find an automated payment plan that works with your budget.
Think of your customers
When it comes to payment management, always keep your customers in mind. When you sign new contracts or set up any recurring payments for services or products, make sure that the terms are clear and that they understand what is expected of them each month. This helps to ensure payment on their end as well as yours – which means more money for both of you.
Put yourself in your customer’s shoes – would you be likely to pay for a product or service if the company didn’t even bother asking? Would they be able to give an accurate estimation of when they could afford to pay if they didn’t know what was due when? If the answer is no, it might be time for some adjustments!
Pay your suppliers first
When it comes down to deciding which bill gets paid when there has been debate over whether or not you should pay your suppliers before you spend money on other expenses. Many people believe that it is more important to ensure that your employees get paid than to pay the guys who are providing you with goods for resale.
However, when it comes to payment management, there are several benefits of paying the supplier first. One key benefit is that they will be happier since they know their bills are being paid in full and on time – which might lead them to provide better service in return. Additionally, if you end up running into financial problems down the line, then at least you have made sure that one of your creditors received what they were owed before anyone else.
If possible, try to avoid any disagreements with your suppliers because missing a payment or even just delaying it can lead to a variety of unforeseen problems.
Understand the terms and conditions of your contracts
When you sign a contract with a new business, you must understand what is expected of you and when exactly those payments are due. Contracts are often very confusing pieces of paperwork for both parties, especially once they’re crunched down into small print. Consider hiring a professional advisor to help with your investment decisions. However, there is almost always an email address or phone number available if you have any questions regarding the specifics of your contract.
Before signing on the dotted line, make sure to read over every detail very carefully – twice if necessary. Be sure to ask too many questions as well, since this can be used against you in court later on. If you still have a hard time understanding the terms and conditions of your contract, consult a lawyer.
Although you might not be able to pay all of your bills every day – or even every month – it is important that you stay up to date on when each bill is due. One late payment can lead to expensive fees, so it’s best not to take any chances. Whether you are paying by mail or online, always make sure that you aren’t sending payments in too early or too late.
