Getting paid on time is an ongoing challenge that can make or break your small business. Even your best customers may be slow to pay due to bureaucracy or other issues. Here are 10 steps you can take to help speed up payment and maintain smoother, more predictable cash flow for your business.
1. Design your invoices with professional flair
It might seem like an insignificant detail, but how your invoices look really matters. If your invoices look less than professional, that can reflect on how customers perceive your business. Some clients might feel they can push your payments to the back of the line.
In addition, the design of your invoice can encourage faster payment by directing the recipients’ attention to critical information, such as the amount due and due date, where and how to pay, what the invoice is for, and whom to contact with questions. Keep your invoices clear, simple, and uncluttered, and use color to highlight the most important points. One study found that saying “Please” and “Thank you” on your invoices can also increase your chances of getting paid. Finally, since that invoice does reflect on your brand and business as a whole, add a professional logo and general contact information so your customer never has to search for it.
2. Assemble all the details
If some of your clients are big corporations, institutions or government agencies, it’s possible that your invoices may get slowed down by bureaucracy.
Before creating an invoice, determine the individual, job title, department, email and/or mailing address it should go to. Also check with that your main client contact person to confirm what format of invoice they prefer and whether they need the invoice to include specific details, such as P.O. numbers or your company’s tax ID number. You can often prevent delays by taking these steps and including these details.
3. Be straightforward about due dates
Use language that makes your payment expectations clear. For example, research has shown that stating, “Payment due upon receipt” is less effective than stating a specific due date. “Net” can also be confusing; instead of “Net 30” it can be better to say “Payment due in 30 days” or, again, stating a particular date.
4. Clarify payment terms upfront
Clients should never be surprised by anything on your invoices. Be sure that deliverables, payment amounts, and payment terms are all agreed upon at the beginning of the project or when the order is placed, and that you have a signed agreement confirming this information.
5. Send your invoices promptly
The faster you invoice, the faster you will get paid. Assuming the client doesn’t have specific requirements for how often you invoice — such as the 15th of each month — make it a habit to invoice clients immediately upon delivery of your product or service. You can also set up a schedule to invoice every Friday for work delivered that week, or on a schedule that works best for you and your customer.
6. Accept mobile payments
If you regularly deliver products or provide services to customers in their homes or offices, using mobile payment technology can speed payment by allowing you to accept debit and credit card payments immediately. Square is one of the best-known mobile payment apps, but there are others including Intuit GoPayment and PayPal.
7. Go digital with online invoices and payments
If you’re still mailing out paper invoices and waiting for checks to come in, stop. Instead, start invoicing customers online and accepting payments electronically. For example, if you use an accounting system like QuickBooks or FreshBooks, it’s easy to send online invoices. Many customers actually prefer this method, since it saves them from writing checks and spending money on postage.
You can also use Fundbox Pay to request payment from customers online. Fundbox Pay is a smart way to ensure you always get paid on time, while still allowing your clients to take advantage of 60-day payment terms. It’s a win-win situation: You can receive funds as early as the next business day, while your customers can wait longer to pay you.
8. Offer incentives for early payment or charge interest for late payment
Depending on the size of your typical invoice, it may be worth offering customers a percentage off in exchange for early payment. You can also encourage on-time payment by charging interest on late payments. (Before setting interest rates, check your state’s usury laws.) Make sure you include details of incentives and interest rates in the original customer agreement.
9. Follow up on late paying clients quickly
Don’t wait until payments are 30 days overdue to check with the customer. Create a process for following up the day after payment is due. For example, you can begin with a standard, polite email reminding the customer of the overdue payment, and then follow up with a phone call. Many late payments are simply due to misunderstandings or forgetfulness, and by reaching out to the customer you can often clear things up quickly.
10. Monitor your cash flow
Keeping an eye on your cash flow will alert you when funds are running low. That way, you’ll know when you need to either press your customers for payment, or turn to other financing options. If you have a little bit of extra operating funds in the bank, you’ll be more equipped to handle any delayed payments with grace under pressure.
There you have it: 10 solid tips for getting paid faster. In the next few weeks, we’ll dive in to these ideas in more detail, arming you with the what and the how of implementing them. Stay tuned.