In the prior post, we touched on some of the ways switching to automated accounting services can help you keep better track of client payment history and streamline processes. However, even with the added oversight and improved customer services offered by industry-specific ERP solutions, there may still be times when clients don’t always meet their payment schedules.
In addition to offering incentives for paying on time, there are a few penalties you can implement that will give clients a bit of a nudge without being too problematic. We’ve discussed some of them below.
Penalties for Late Payments
One of the most common penalties companies often enforce for late payments is charging a small percentage on overdue invoices to encourage a timelier payment. Of course, how much your firm is legally able to charge for overdue payments will vary depending on your locale, so making note of all the legalities beforehand is essential.
This is where having automated accounts receiving processes and industry-specific global ERP software in place can make your job easier. It will enable your company to not only track late payments effectively but also prevent invoices from going past terms in the first place. By automating the payment process, you can ensure that every invoice clearly states such terms in addition to all pertinent credit info.
Oneir Solutions provides several options for adding interest to a client’s account. One simply prints the amount charged to the statement itself, the other posts an invoice to the customer’s account detailing the interest charge.
With this solution, the percentage of interest is calculated based on any overdue amounts and how long they’re past due. Once this is done, interest is then charged from the first day they’re past due until the end of that billing statement. Grace periods and other details can also be easily entered.
This charge will post no record on the particular account or affect your books: it’s solely meant as a “nudge” to elicit payment. If your firm only collects interest if it’s paid by the customer, this is the ideal route.
The interest for this solution is calculated in the same manner as above, but this time the invoice transaction for that particular amount will be calculated. Then these special invoices appear in accounts receivable like any other: once paid, they’re processed the same way as all of your other invoices.
This solution will also record the paid invoice as revenue and increase your accounts receivable each time one is posted.
Call Oneir Solutions for affordable industry-specific ERP services