There’s nothing worse than when business is booming, but you’ve got nothing to show for it because clients aren’t paying invoices on time. When the bills start flowing in on your end, there’s little left to cover costs, let alone take home the pay you deserve. Poor cash flow will constrain your business’ ability to survive and thrive, putting your immediate future at risk and making it increasingly difficult to sustain long term growth. One of the easiest ways to get the cash flowing through your business is to facilitate swifter settlement of your invoices. Here are some simple tricks to help you get paid more quickly.
Setting the boundaries from the start is the key to any good relationship. Make sure your payment terms are clear, concise and prominently displayed on your invoices so clients are in no way confused about the expectations. Educate your staff about the terms and conditions and ensure they explain them clearly to all new clients. After all, forewarned is forearmed!
While it’s nice to think you can trust your clients to pay for what you provide, being nice can sometimes equate to being naïve. When you allow a client to pay after delivery, a credit check is essential, especially if you’re talking about substantial sums of cash. A credit check will allow you to access a client’s past payment data, bankruptcy records, details of any legal proceedings in place against a company and an overall risk rating on how likely a customer is to pay their bills on time. This in turn will allow you to properly assess the likelihood of being paid in full and on time.
When it comes to managing cash flow, your client isn’t the only one who holds the key to your success. If don’t send the invoice out on time, it won’t be paid on time. Make sure you (or your accounts clerk ) set up a regular weekly, fortnightly or monthly invoicing schedule. You can also make the most of your accounting software’s capabilities to set up automated invoicing for clients who have recurring bills – that will be one less job on your list!
It doesn’t matter whether you’re charging a set price per product, billing by the hour or some other arrangement, ensuring the fee structure is spelt out clearly on the invoice is crucial. Going back and forth with your client explaining or clarifying their invoice will waste precious time that could be better put to use in your business, and will inevitably add to the time it takes for payment to proceed.
It’s important to follow up on late payment quickly and assertively. It’s true that the squeaky wheel gets the oil. Your reminder lets the customer know you are serious about being paid and ensures that invoices don’t get overlooked. Most software programs include automated features that can send out a friendly reminder at a pre-set time. Make sure this functionality is set up.
While automation can be a boon for business, it can also be a trap for those who think they can set and forget. Make sure you take some time to regularly review your accounts receivable. While this can help reassure you that the automated processes are still running smoothly, it is also a useful way to track who is and, more importantly, who isn’t paying on time, while also identifying concerning late or non-payment trends before they become a real problem.
Your credit terms set out the amount of time that customer’s have to pay their invoice. It’s a good exercise to review your credit terms. Sometimes credit terms are dictated by an industry standard or contract or by what your competitors are doing. But where possible it makes sense to reduce the number of days you allow a customer to pay. When you do it’s critical that you advise your clients of the change and ensure that the new terms are clearly marked on your invoice.
Everyone loves an incentive, and clients are often no different. Factoring an early payment discount into your margins can give your clients the sense they’re coming out in front by settling their bills sooner, while in reality your business’ bottom line is what reaps the reward if they take up the offer.
The easier it is for your client to pay, the more likely they will make a payment. A “click and pay” button embedded into your online invoice makes it quick and easy for your client to pay your invoice. Providing multiple options of payment, including credit cards, direct bank transfer or BPay, means clients can pay in the way that is most convenient for them.
Talk to your clients, and be understanding when they come to you to discuss payment problems. But if you find you are consistently chasing a client for late payment, you have to be prepared to let that client go. The energy you waste chasing payment would be better invested finding a client who respects you enough to pay you on time.
Please give us a call if you need help setting up automations, reviewing your invoice formats and drafting payment policies. We are always eager to help our clients get paid quickly!