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How To Make Your Customers Pay On Time. Lessons From The Web Hosting Industry

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Payment collections is always a hassle for any business offering goods or services. In most industries, once goods have been dispatched or services have been rendered, the entire control to recover the compensation slips out of the hands of the seller. Where goods are concerned, you can do nothing but send reminders to your customers about the outstanding payments. In case of services, once they are rendered and the payment is in default, usually you may refuse to provide services in future unless the money is paid. Recurring services are at a bigger advantage since stoppage of services in future can be used to recover past debts. The telecommunications sector has a more significant advantage when it comes to recovery of dues.

Eg: Upon non-payment of a phone bill, the phone company can just disconnect your phone line from their end. They may also insist that you pre-pay for your connection and deduct call charges from your pre-paid balance.

The web hosting business also has a similar advantage. But mostly web hosts prefer to exercise restraint and resort to disconnection of services only as a last resort. This article highlights some key points which can be helpful to ensure that your business remains financially healthy and your cash flow is not held up by errant customers.

Incentive

Many electricity companies offer a discount of up to 5% if you pay promptly i.e. within 5 – 6 days of the bill date. This encourages customers to pay promptly and helps the electricity company advance its payments to maintain its cash flow. The incentive discount is adjusted against the next bill and mentally pleases the customer.

Penalty

Phone companies prefer the “stick” approach and impose a fine or penalty on late payments. Payments after the due date may also attract an additional interest on the unpaid amount. The bill clearly mentions what the amount will be after the due date. This acts as a deterrent to customers planning to procrastinate the payments.

Payment Options

Offering an installment system or offering Credit Card payments is also an option to ensure that you get paid. Payments by credit card are safer for the seller, as it puts the burden of recovery onto the banks or credit card companies. However, one must note that for taking on this burden, banks charge between 1% to 5% of the transaction amount. Monthly installments are also a good option for small clients or persons who are struggling with their cash flow themselves.

Automation

Automated billing systems allow you to invoice your customers, collect online payments and also send out reminders without any human intervention. This enables the business to be paid promptly and avoids delays due to human error of the staff or employees. These systems also offer automated Credit Card handling and charge the credit cards automatically on the due date. Investing in such a system is beneficial to the client as well as the seller, since both have an online system which is accessible 24 x 7.

Reminder services

For those who don’t want to invest in a full-fledged billing system can also use online reminder systems. Services like “Monkey On (your back)” allow you to set up reminders which will keep prodding your customers into making payments. Though this option is a bit informal, it allows you to constantly prod your lazy customers into paying their dues.

Web hosting providers also have an option to suspend or terminate the customers account upon non payment. Suspension allows the user’s files to remain on the server in a frozen state. The account becomes inaccessible and a message appears on their website, stating that the account has been suspended. Termination is a more drastic step i.e. it wipes out all the customers information from the server. This means that as an after thought if the client decides to pay, even if he renews his account, he will not get his previous data back. he will have to start from scratch or restore his site from a previous backup.

Most web hosts are compassionate and understanding and offer grace days, before the account is terminated. However, with the current economic situation globally, they too are under a lot of pressure to maintain financial stability.

 

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