Payment issues are common in many Irish businesses. Slow payers put a strain on your day-to-day operations and can have a negative impact on cash flow. They also use up resources unnecessarily, can damage client relationships, and distract you from advancing your business. Businesses with slow payment issues are usually making one or more of the following four invoicing mistakes. Are you making any? Here they are.
- You Invoice Slowly
Invoicing quickly makes administration easier and there is less chance you will make a mistake or – worse still – forget to send the invoice at all. When you should send your invoices will depend on the type of business you have and the type of products you sell. The general rule however, is you should invoice your clients as soon as you possibly can. That often means invoicing every day. Of course the sooner you get the invoice out the sooner the clock on your payment terms starts ticking. You will therefore get payments in quicker.
- Your Invoices Are Not Detailed Enough
Invoices with minimal details often end up in the query pile, which results in payment being delayed. You should therefore include as much information on the invoice as possible. This includes details of the product or service that you delivered. Make sure you describe it fully and include information like quantity, hours worked, and the date the product or service was delivered. You should also itemise the invoice so separate products and services are listed individually.
Your invoice should also include details of your payment terms as well as information on how payment can be made. Include the due date for payment as well, and make sure you list detailed contact information.
- Your Payment Terms Are Too Long
The default payment terms for many businesses are 30 days, but that is a hangover from the days when almost all payments were made by cheque. There is no need to have such terms in the modern era of electronic payment methods. Therefore, if you still give your clients 30 days to pay, you should consider shortening it. Go for something like 14 days or seven days. Remember too that many businesses pay after the due date, regardless of what it is. For example, they may pay 14 days late. If your payment terms are 30 days, that means you will probably not get paid until the 44th day. If your payment terms are seven days, however, you will get paid around the 21st day. It is almost always better to have short payment terms.
- You Don’t Chase Payments
Even when you address the three mistakes above it is still possible to have clients who are slow to pay. How you deal with them is therefore crucially important. In particular, you have to actually deal with them – leaving them because it is too uncomfortable to push for payment is really not an option. You are not being unreasonable by asking for payment for a product or service that you have delivered, so make sure you have robust procedures in place for chasing late payers and overdue invoices.
For more help with invoicing or payment issues, or any other business advice, please contact a member of the Gilroy Gannon team today.