Getting your customers to pay on time is one of the most important yet often overlooked business tasks.
If your invoices are not paid on time your cash flow suffers.
If your cash flow suffers you may not have money to pay employees, suppliers, debts, taxes or have money to invest in growing your business.
Maximising your business’s cash flow is crucial and in this article we’ll explain how to increase your cash flow by getting your invoices paid faster.
Send Invoices Immediately
Everyday you are late on sending an invoice is another day later that you’ll be paid. In fact when your invoices are sent out quickly it shows customers that you are organised and that you will be following up quickly if payment is late, which means your invoice will get paid first.
Make Your Invoices Very Precise
Every invoice should clearly communicate all details of the transaction and especially the due date of payment. If you offer net-14 payment terms then also list on the invoice exactly what date that will be.
Explain Your Invoicing Terms Prior To The Sale
Whatever your payment terms may be, ensure that the customer is aware of them before the transaction. You also want to get them to sign your Terms Of Trade (which include your payment terms) before delivering your goods or services so you have a legally binding document should you need it later.
Offer Multiple Payment Forms
The easier you make it for customers to pay you the quicker they will do it, and the less excuses they will have if they are trying to withhold payment.
Common Payment Methods:
- Electronic Funds Transfer (direct deposit)
- Credit Card
Online technology has made getting paid in various forms easier than ever so make sure you are taking advantage of this in your business.
Offer A Reward/Fee
Maybe you could offer a very small discount if payment is made by the due date to encourage on time payment. On the other hand if payment is late there could be some kind of fee payable. In this case you may want to test and measure a reward/fee structure and then decide which one to use based on what works best with your customers.
Have Automated Reminders
Setting an automatic reminder to go out the day before an invoice is due can dramatically increase the amount of invoices that get paid on time. Everyone is busy and sometime people simply forget (including you). So having a friendly, automated email go out 1 or 2 days before the invoice is due just as a reminder is a great idea.
You can also set up an email to go out 1-2 days after the invoice is due to remind them again if it has not yet been paid.
Get Payment Upfront
When dealing with new customers it is recommended to get at least partial payment upfront. Try make your deposit enough to cover your costs, so you won’t be out of pocket if the customer turns out to be a slow payer.
Create A Strong Relationship
This goes for all aspects of your business but especially for getting paid. When you have a strong personal relationship with a customer you will always be the first one to be paid even when funds are tight. No one likes to owe their friends money, so a simple phone call, a friendly email and nurturing the customer relationship can go a long way.
Have A Consistent Follow Up System
If a customer is late or refusing to pay it’s crucial that you have a systemised follow up procedure that you can implement as soon as the invoice becomes overdue. Email and letter templates, a collection call script and even a letter of demand template, are all tools that every business owner should have in their arsenal.
Hire A Professional Debt Collector
If an invoice is 30 days or more overdue than it is time to talk to a professional collection agency. These agencies have proven follow up methods to recover outstanding money fast.
A reputable, ethical and experienced company will work to recover your funds whilst representing your business in a professional, respectful manner.
Often once a professional collection company is introduced into the discussion payment is made very quickly and many offer a “No Recovery, No Fee Service” so you only pay a small percentage of the total funds recovered.