How can I get paid faster and avoid late payments?
Does your business suffer from late payments? Cash flow is one of the top reasons that small businesses fail within 18 months of their inception. You can’t pay your bills without cash. Small businesses need to develop a plan for the payment of their invoices, so that cashflow does not become the reason the business fails. Here are some tips to help you get paid faster.
- Don’t post your invoices
If you are still posting your invoices, you are slowing down the payment process, and run the risk that it is put in a drawer and forgotten about. Online accounting software such as QuickBooks (LINK) allows you to email invoices saving on time and costs.
- Be clear with payment terms, both before starting work and when you invoice
Prior to beginning work or selling a product, make sure that you are clear on your payment terms. Rather than allowing 30 days for a customer to pay, insisting on 14 day terms might speed up cash collection. Have the conversation with the customer and negotiate a deal that works for both parties. Also make sure that payment due dates on your invoice are clear, so that there is no confusion, put them in bold if you have to!
- Send online payment reminders
Accounting software like QuickBooks and Xero often give you the option to add a ‘Pay Now’ link which will take the customer to a page where they can pay online straight away. Many customers won’t think twice about doing this as its easier for them and you might even get paid before your terms!
- Give customers all of the information they need (attach files)
If you use time sheets or need additional information for your clients to pay, ensure that this is sent alongside the invoice to ensure that there are no excuses for delays. You can add the files alongside your PDF online or through accounting software.
- Invoice as soon as possible
If you aren’t doing this already, you are losing time in the payment process. Many businesses will invoice at the end of the week or month, but by doing this you may be delaying payment by up to 30 days. To keep cash flow moving, invoice as soon as the work is done, or earlier if possible.
- Offer incentives for early payment
Depending on the value of your invoice, you might like to offer the customer an incentive for early payment, or even charge interest for late payment. Before you start to charge interest, ensure that you have researched any legal issues with doing so.
- Follow up on late invoices quickly
It can be an awkward conversation to have or email to write. Don’t wait till a payment is 30 days overdue to get in touch with a client that owes you monwey. You can start with a polite reminder and then follow up with a call. Most late payments are simply misunderstandings or forgetfulness and often this can be cleared up quickly through polite communication.
- Monitor cash flow
Try to keep an operating fund, that you can dip into if you are on the receiving end of late payments. Make sure you are on top of your cash flow and are aware of how delayed funds might impact the business.
Remember, a customer who doesn’t pay is not really a customer, even if they give you a lot of work.
If you would like to talk to a member of our team about using online accounting software to speed up your payments get in touch with partner Robert Willison who can help you get the right solution for you and your business.
Robert Willison: Business Services Partner
Tel: 01825 763366
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