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40 politely-worded templates to get invoices paid

How to use promised payment dates

How to use promised payment dates

The current late payment crisis has significantly impacted businesses of all sizes, reducing cash flow and creating additional financial pressures that threaten business survival. 

While using clear and timely invoicing, practical payment terms, and automated payment reminders can help reduce the risk of late payments; many businesses are also implementing promised payment dates into their accounts receivable process to hold customers accountable and help ensure they are paid on time.

If you're not familiar with the concept of promised payment dates, don't worry. In this article, we'll dive deep into what promised payment dates are, how to use them, and their benefits for your business.

By offering promised payment dates, businesses provide a solution that benefits both parties. Customers can pay at a time that suits them, while you have the reassurance of knowing that payment is committed to on an agreed-upon date.

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What are promised payment dates?

A promised payment date, sometimes referred to as a 'bill of exchange', is an agreement between a customer and a business that sets out the date on which payment is due.

Generally, promised payment dates are used when the customers cannot make a payment within the timeline set out in your payment terms. By offering a promised payment date, your customer is committing to pay you on the agreed-upon date.

The benefits of promised payment dates

There are a number of benefits to offering promised payment dates as an option to your customers, including:

  • It provides a solution that suits both parties -  Instead of a stalemate where both parties cannot come to an agreement, making use of alternative payment options, such as a promised payment date, allows for a solution that suits both parties. The customer can pay at a time that suits them, and the business has the reassurance of knowing that they have committed to making a payment at a set time.

  • It increases customer satisfaction - Allowing customers to make payments on their own schedule, without worrying about additional late fees or penalties, is sure to help increase customer satisfaction.

  • It prevents the formation of bad debt - In light of the resources needed to chase unpaid invoices, many businesses, especially smaller ones, simply write off overdue invoices as bad debt. By offering a promised payment date, businesses may be able to prevent the debt from becoming unrecoverable.

  • It helps with cash flow forecasting - Since promised payment dates are a fixed value, i.e. the customer has committed to making a payment on X-date, it allows businesses to better forecast their future cash flow.

  • It helps build customer relationships - Your customer may have a perfectly good reason for not being able to make a payment within the originally agreed-upon terms. Offering a promised payment date shows that you are willing to be flexible and understand their situation, which can help build strong customer relationships.

As you can see, the effective use of promised payment dates can help businesses of any scale overcome late payment issues, build customer relationships and prevent the formation of bad debt by offering an alternative payment solution that is more manageable for the customer.

Setting up promised payment dates

Now that you've got a better idea of what promised payment dates are and the benefits on offer, let's take a closer look at best practices for using them.

Make use of open communication

The first step in setting up any promised payment date is to communicate the details with your customer clearly. After you have ascertained that they cannot pay within the terms of the original agreement, you will need to negotiate a new payment date that works for both parties.

Transparency is key here, as there is no point in setting up a promised payment date that the customer is also unable to adhere to.

Once you have a date that both parties agree on, it's best to set out the details in writing and have your customer sign a copy of the agreement. This will ensure that there is no confusion or miscommunication and that both parties are clear on what has been agreed upon.

Remain professional

While late payments are an emotive subject, remaining professional and courteous throughout the process is essential. The primary aim here is to collect the money you owe within a reasonable timeframe while retaining the customer for future business.

However, while being flexible and understanding with your customers is essential, you must also ensure that any promised payment date works for you as much as it does for your customer. Consider what your business can afford in terms of delaying this income from the customer, and if payment delays are not feasible, consider implementing a payment plan to ensure you receive partial payment sooner, or late fees to discourage them from making payment beyond your payment terms.

Follow up on non-payment

Ideally, your customer will make a payment on the agreed date. However, if they fail to make a payment, you must follow up with them and negotiate a new payment date. This is where having the agreement in writing comes in handy, as it will help reinforce the terms that have been previously agreed upon.

Multiple failures to pay might indicate that it's time to refer the matter to professional debt collectors, who can take more stringent action to get your money back.

Using promised payment dates to improve accounts receivables

Cash flow management is critical to improving the efficiency of your accounts receivables and invoicing process. Promised payment dates can help you improve your cash flow management and customer relationships.

By offering reasonable payment terms and being open to negotiation, you can ensure that payments are received within the best timeframe for both parties. This helps ensure that debt is not written off as bad debt, improving your accounts receivables process and cash flow management.

Instead of simply writing off outstanding invoices or turning to the costly and lengthy process of court proceedings, promised payment dates to provide an alternative, flexible solution that can work for both you and your customer. 

While there are times when using the courts and debt collectors to recover monies is unavoidable, finding ways to negotiate and agree on payment terms suitable for both parties should always be the first option. 

Additionally, because it is a fixed date, offering a promised payment date helps with cash flow forecasting by setting a clear timeline for when payments should be received. This allows you to manage your finances better, ensuring that you are not left with any nasty last-minute surprises regarding cash flow.

Tracking the effect of promised payment date

As with all aspects of your accounts receivables, tracking the effects of promised payment dates is critical to assessing their effectiveness.

By tracking the promised payment dates of your customers, you can determine whether or not a promised payment date successfully collected what was owed to you. This data will then help you identify which customers need further negotiation and which ones are more likely to pay on time, enabling you to refine your accounts receivables process.

Additionally, you can use this data to refine your approach to promised payment dates, changing the terms and conditions to better suit the requirements of both your customers and your business.

Tracking the effect of implementing promised payment dates goes hand in hand with customer segmentation. By segmenting your customers according to their payment history, you can set up different terms and conditions based on their different behaviors.

Some might respond better to a promised payment day, some might prefer a payment plan, and some might pay faster when faced with late payment interest or early payment incentives.

Tracking this kind of data helps ensure your accounts receivables process is as efficient and effective as possible while also helping you get paid on time!


Making use of promised payment dates

As you can see, promised payment dates are an effective way of managing your customers’ payments and improving your accounts receivables process.

By understanding how to negotiate reasonable payment terms, tracking their effect, and using customer segmentation, you can reduce late payments and help ensure you don’t need to write off bad debt. 

Every business is different, so figuring out what works best for you and your customers is crucial. With a bit of research, careful planning, and communication, you can find the perfect balance between timely payments and customer relationships that benefits both parties.

To help you begin the process, here are some actionable tips that you can use to implement promised payment dates:

  • Put a promised payment date policy in place - Have a specific policy outlining both parties’ obligations and responsibilities around any promised payment dates. This allows staff to follow consistent processes with all customers.

  • Communicate clearly with customers - Make sure your customers understand the terms of the agreement, so they know when and how to pay you on time.

  • Offer multiple payment options - Give customers the ability to pay in various ways, including online payment portals and direct debit. The easier it is for your customer to pay, the better.

  • Monitor and review your policy - Regularly review your promised payment date policy and make adjustments if necessary, this will help you keep up with customer payment behaviours.

  • Use it as part of a holistic credit control approach - Don't use promised payment dates in isolation. Combine them with practical payment terms, automated reminders, and customer segmentation for the best effect.

Chaser supports promised payment dates, allowing you to add another tool to your credit control arsenal. With Chaser, you can also create customised payment plans for your customers that meet their specific needs and leverage automated follow-ups to ensure timely payments.

To learn more about how Chaser can help you get paid faster, contact us today or start your no-obligation 14-day free trial!

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