If your business requires giving customers terms (ability to pay after date of invoice) then you know how tedious it can be to collect payment.
Some customers are great about paying within the time frame you've set! (we love those customers) You give them net 30 days, check shows up in your mailbox on day 20. We need more of those customers. (side note: if possible, you should decrease your terms to 10 days to help with cash flow)
Often, customers aren't so great at paying. Sometimes they just need a little nudge. Late fees will provide that nudge.
HIGHLY SUGGESTED TIP: In order to not upset your customers & to make this process effective, I highly suggest you add a notice on your invoices that a late fee will be applied after x amount of days if payment has not been received.
This is going to do 2 things.
Alert your customers to the fact that you will be charging a late fee if their payment doesn't come in on time. No surprises.
Encourage your customer to go ahead and send payment so they don't get hit with that fee. (money in your account sooner)
Maybe you've been thinking to yourself "I want to encourage customers to pay sooner by adding a late fee - but I don't have time to monitor the due dates, add a late fee & resend the invoice."
Well, good news!
Quickbooks Online has a feature you can turn on that will automatically assign a late fee to invoices after they've passed their due date. You can then turn on another feature that automatically sends reminder emails to customers once their invoice is past due.
This takes TWO tasks off your plate.
Turn on late fees
Login to Quickbooks Online
Go to Settings (gear icon)
Click Account & Settings
Select Sales tab
Select the Late Fees section & check the box to turn on late fees
Choose flat fee or percentage
Choose the frequency in which you want the fee applied
Choose a grace period
Turn on automatic email reminders
Still in Settings (gear icon) under Account & Settings
Select Sales tab (same place as late fees)
Select the Reminders section and toggle to ON
Choose the amount of days after the due date that you want the reminder to be sent
Make sure the amount of days falls after the grace period you selected for late fees (grace period of 5 days, set your reminder to 7 days after due date)
Update the email subject line and body of the email to inform the customer that a late fee has been applied
& you're done!
Now a video for the visual learners:
An important part of cash flow management is collecting money from customers as close to the date of service or sale of product as possible. This feature is going to help you with cash flow. We're not as concerned about collecting the late fee as we are about encouraging the customer to pay faster.
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