How are payments received from customers

Tips and tricks to avoid payment defaults

Entrepreneurs can prevent a large part of all payment defaults in advance. Primarily, these arise from financial problems or dissatisfaction. The following steps must be observed in advance of working with a customer:

1. Credit information

Part of a professional cooperation is to inquire about the solvency of the customer before services are exchanged. The Hamburg Chamber of Commerce recommends first and foremost an inspection of the commercial register and the list of debtors of the local court. This information is free of charge and can also be provided without the consent of the business partner. When it comes to particularly large projects, a credit report from Schufa also makes sense. To do this, you should ask your customer to provide a self-assessment.

2. Prepayment or direct payments

With the help of instant payments and prepayment, payment defaults can be avoided. These can be offered across industries and ensure you get your payment. With cash discounts and other rebates you can make these payment options more attractive for your customers.

It is common for service providers to agree to an advance payment. In this way you can be sure that at least part of the agreed amount will be transferred on time.

3. Issue invoices promptly

Invoices should be issued immediately after a service has been provided in order to achieve the most direct payment possible from the customer. You can shorten the legal payment term of 30 days with appropriate terms and conditions or a short confirmation from the customer. A payment term of 14 days gives the customer more than enough time to make a transfer. In return, however, omissions can be addressed much earlier.

4. Pay attention to your gut feeling

People's gut instincts often determine their success or failure. If a customer seems dubious to you or if you suspect financial difficulties, you should take this seriously. In such cases it often makes sense to avoid cooperation or at least refuse to pay on account.

5. Ensure customer satisfaction

Very few payment defaults are malicious. Most of the time it is a mixture of customer dissatisfaction and financial problems. It is therefore particularly important to make sure that the customer is really satisfied in order to avoid payment defaults. So seek dialogue and make sure you know your customer's requirements. Should something go wrong, you can grant a discount. While this will negatively affect your bank statement, it will make it more likely that you will actually receive your money.