Getting paid on time can be one of the most frustrating aspects of running a business. Without payments cash flow goes down and so does the time you have to focus on business growth.
Your cashflow is the lifeblood of your business. If all you do is send an invoice at the end of each month then it won’t maximise your chances of getting paid quicker.
So how do you avoid having to phone your customers chasing 60 day overdue accounts? Here are some top tips on getting invoices paid on time:
Have a conversation about payment terms
When you get a new customer always ensure that you clearly discuss your expected payment terms with them. Avoid confusion by sending them your payment terms as part of their customer agreement. Explain what will happen if the payment terms are not met and replicate this message on all invoice correspondence.
Make your invoices easy to follow
Do you ever get phone calls from customers asking you what a line item is on your invoice? Make it easier for them by actually stating everything clearly. For charges based on your time (hourly rate) allocate all your times accordingly. If you have any confusion in your invoice then it can cause delayed payments.
Keep records of work completed
Keeping accurate records and logs of time spent working on customer accounts, and including all costs incurred, will help ensure your invoice is accurate. This will save you time they question one of your invoices. It will also highlight when a customer’s account is getting on the high side.
Consider splitting invoices
If a job spreads over the course of months or longer, consider splitting up the job into separate invoices. This will help you get paid for parts of the job you have completed. Very useful for larger jobs which require high purchase costs to fulfil.
Invoice as soon as possible
The quicker you send an invoice the quicker you can start chasing payment. And the sooner they will make a payment for it. The most valuable part of sending invoices out as early as possible is that the customer will have your work fresh in their memory.
Build a good relationship with the accounts department
You can’t always rely on a good-looking invoice, clearly detailed and posted in a timely fashion to get paid. You also need to ensure that you have good relations with the accounts department who will pass the invoice for payment.
Make the phone call
He who shouts first and loudest is usually the supplier that gets paid first so call early and call often. Always let the client know immediately when their account becomes overdue and send out statements regularly. Don’t let your chasing drift without consequence as your customer will get wise and let payments drift to suit.
Keep payment terms short
You don’t have to wait the standard 30, 60 or 90 days for payment. You can can try to establish shorter payment terms. If your customer wants their goods supplied within days or weeks, then you can always ask for quicker payments too. Well, you can ask!
…and if all else fails,
Consider late payment fees
Every invoice states clearly what will happen for late payments. Your terms are displayed in the small print on their invoices and probably include interest charges, but very few people actually charge them. This can be another tool to help your customers pay quicker. Use it once on each customer and they will soon get the message. However, customers do seem to get annoyed at this, so issue it with caution and consider refunding the charges on payment.
If you are tired of chasing non-paying customers or need to access the cash from your unpaid invoices then perhaps an invoice finance agreement can help grow your business.
Access Commercial Finance can help you set up an invoice finance or factoring agreement to suit your needs, contact us here.