Getting invoices paid on time is always an important consideration for any business, large or small. Late payers can cost time and money, particularly at this time of year!
Get paid faster with these tips from us:
Stagger your schedule
Bill some of your clients mid-month and others at month’s end to ensure ongoing cash flow.
Invoice reminders
For those of you using Xero, why not look at turning on invoice reminders? This is an easy way of reminding clients that payment is due or to remind them the payment is overdue. This process is completely automated and does not require you to do any work. For those using other programs, why not look at adding an invoice reminder app, such as Debtor Daddy.
Make payments incredibly easy
If you are using Xero, why not add Stripe or Pay Pal? When you email your invoice, the customer will see a box called PAY NOW and it will take the customer directly to a payment portal. The small cost of 1-2% can be added to the fee or else consider it a cheap cost of reducing time to chase debtors. This is especially useful for smaller invoices. Most online accounting solutions will also have similar systems.
Invoice quickly – and accurately
When a contract wraps up or it’s your scheduled billing day, send your invoices straight away. Automating your invoicing with a cloud-based accounting solution will eliminate the need for time-intensive manual billing and ensure you never fall behind. Before you send an invoice, be sure it’s addressed to the right contact. It also helps to itemize costs in detail so no questions will arise that might delay payment processing.
Set a deadline
Make it clear on every invoice when payment is due – for instance, “Payment due on receipt” or “Payment due within 30 days”. Ideally, you’ll have outlined your payment terms in writing, including any penalties for late or non-payment, when you start working with a client. Summarise your terms on each invoice as a reminder.
Set payment policies
You might choose to reward customers who pay early with a small discount or reward as an incentive—or charge a penalty for late payments. Consider a 5 per cent reduction on invoices paid within a week, or a 2 per cent penalty for every week overdue. Outline on your invoice the different amounts your customer will owe, depending on the date they choose to pay.
Follow up
If a client doesn’t acknowledge receipt of your invoice, check in to make sure it was received. Enquire about the status of payment as soon as a deadline is missed, then resend the invoice with a friendly reminder.
Be willing to negotiate
Sometimes a client intends to pay but needs a bit of time to come up with the cash. Be open to negotiating a payment plan; it’s better to receive payments in small increments than not at all.
Final tips
Although no small business owner wants to resort to legal action, if you’ve tried repeatedly to contact a customer you may have no other option except to claim the loss as a business deduction. One of the best ways to encourage customers to pay on time is to maintain a friendly relationship. Encourage goodwill by adding a handwritten note to your invoices, remember your customers’ birthdays, and be sure to thank them from time to time for their ongoing business.
It’s a simple fact: when your customers feel a connection to the person behind the business that serves them, they’ll be more inclined to take care of their invoices quickly.
Call us for more information on 02 6885 5594 or via email at admin@peacockeacountants.com.au