Get Invoices Paid More Quickly With These Tips

Get Invoices Paid More Quickly With These Tips

A well-run business doesn’t just involve a stellar crew of able employees or successful marketing strategies. It’s not just about sales and ensuring that you make profits.

One aspect of running a business that many inexperienced owners face is failing to get invoices paid on time by clients. Without money coming in, how can you expect to have a business to run smoothly?

Cash Flow Matters

Money in, money out. That’s how businesses work. A client pays for a product or service and it is distributed to paying employee salaries, debts, and other payables. When a client (or several clients) fail to make payments on time, then you are faced with a conundrum: where do you get your money for cash flow?

An affected cash flow system is one of the most common issues business owners have to deal with. It is also easily solved with a few tips from JMA Credit Control:

  • Send out invoices as soon as it is due. When a service has been completed or products have been diligently delivered, issuing an invoice on time is crucial to your cash flow and business. Delaying it only delays payments. An invoice that’s issued on time also gives off the impression that you are organised, making the client believe that a late payment will be highly noticeable (and embarrassing!)
  • A detailed invoice is a must. Aside from listing down the type of service or products procured, you should also be specific about details such as payment terms. If you had initially agreed on settling 7 days after receipt of invoice, then it should be stated in your invoice. Make it clear so that there is no room for confusion.
  • Even before sealing the deal, make sure to discuss your invoice terms and conditions with your client. They should be aware of how you wish the transaction to transpire. Letting them sign a Terms of Trade, which covers payment terms, will protect both yourself and the client. This is a legally binding contract that you can refer to later if the need arises.
  • Offering different payment forms will make it easier for the client to pay up — and give less excuses about missing the payment date. Common payment methods include cash, online bank transfer, credit card, PayPal or other online money sending service, and cheques. The internet has made it infinitely convenient to make transactions so take advantage of how it can positively impact your business.

 

 

  • If you can afford it, offer a discount or a reward for paying early or on time. This is often referred to as an “early settlement discount” and encourages customers to do so. Alternatively, a late fee or penalty should be enforced if they fail to carry their end of the bargain. This will be a trial and error experience, so be ready to test out if lessening the total amount or deducting a percentage is better as a reward for early payments.
  • Automated reminders are great to remind everyone (including yourself!) about an upcoming payment. Simply set up an automated email to be sent out to pending invoices a day before payment is due. With everyone busy with all sorts of things nowadays, an automated email will work in your favour.
  • Upfront payment is the best. This is especially true if you’re going to deal with new clients you haven’t really gotten to know yet. Making your deposit enough to cover expenses is your best bet so you won’t have to worry about cash flow if your client turns out to be a delinquent payer.
  • A consistent follow up system should be in order. When the customer “forgets” or refuses to pay on time, a follow up system of emails and calls is usually enough. Have a script for calls and an email template ready. If worse comes to worse, a letter of demand drafted by a professional should be in your arsenal of documents for your business.

Setting up a Terms of Trade

Avoid late payments in the first place by setting up a Terms of Trade. This is a legally binding contract between yourself and the client. A professionally written contract is an important part of letting your business run as smoothly as possible.

A Terms of Trade include the following details:

 

 

  • Payment terms and conditions. Aside from the amount owed, it will also include when payment should be made, any late fees (if any), and what you intend to do in case the client does not pay.
  • Services and/or products that you will provide.
  • How you want to be paid. It should be clear if you prefer to be paid in cash or if checks are fine with you. Always remember that cash is best as well as online bank transfers since it reflects real time transactions. Stay clear of checks as it will take time for the bank to clear those. When it bounces back, you might have a hard time recovering debt.
  • A Terms of Trade will be legally binding and be used in court as long as both parties sign the contract. You may file charges if the need arises.

Get Professional Help

Usually when an invoice is over 30 days overdue, it is time to get the help of professionals. We at JMA Credit Control have had over decades of experience with debt recovery, helping out small businesses all over Australia get their cash flow back in order. Contact us about how we can help you right now!

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