Getting invoices paid on time is crucial for your business on a number of fronts. The most obvious is that it helps with your cash flow, but there are other benefits as well. Managing debtors and following up on invoices takes time and resources, so getting paid on time will save you money. In addition clients are less likely to spend with you if they have an outstanding bill, so getting them to pay early can also improve sales.
But how do you get your invoices paid on time? Here are 10 tips.
Agree Clear Payment Terms
The starting point is to make your payment terms clear to your client. This should be in writing, ideally in a contract.
Keep Payment Terms Short
The payment term that you set should be as short as possible, and you should be realistic. When do you need the invoice paid? If the answer to that is in 30 days should you set your payment terms as 30 days? The answer is probably not because you will have clients that will run over your payment terms, so your average will be longer than 30 days. As a result if you want paid in 30 days, you have to set your payment terms at around 14 days.
Get Invoices Out As Soon As Possible
Invoicing should be a priority in your business so get your invoices out as soon as possible. The last thing you want is delays that could easily have been avoided if you had sent the invoice on time.
Send The Invoice To The Person Who Pays The Bill
The person who pays the bill might not be the owner of the business, or the person that you deal with, but you should always copy them on any invoices that you send. In other words, send your invoices to both the person who authorises the payment, and the person who actually processes it.
Make Sure The Invoice Is Accurate And Easy To Understand
Queries delay payments. The best way to avoid them is to make sure your invoice is accurate, and straightforward. For example, if you need a PO from your client make sure you get it and include it on your invoice.
Include Your Bank Details
Make it as easy as possible for your client to pay by putting your bank details on your invoice. You should also consider giving your clients as many options for paying as possible. For example, can you take credit card payments?
Follow Up On Overdue Invoices Promptly
Overdue invoices should be followed up immediately. This involves initially sending reminders and then making phone calls. Nobody likes making these sorts of calls but they are essential if you want to get paid as quickly as possible. Here are three tips for making your debt phone calls: 1. call early in the day; 2. call often; and 3. always remain polite and professional but firm.
Add Overdue Fees
You can also consider adding overdue fees to your invoices to discourage your clients from paying you late.
Give Incentives For Paying Early
If overdue fees are the stick, the carrot is offering incentives for paying early. In many cases this actually works better than threatening overdue fees, and even though you are giving a discount, it often makes good business sense. For example, give a percentage discount or some other incentive if the client pays you upfront.
Get To Know Your Client
If you are easy to deal with as a supplier you will find that your client is much more willing to work with you. For example, if they have a regular payment run, change your invoicing days or tweak your terms so that you can take advantage of it.
Finally, the easiest way to ensure that your clients pay you early is to insist on payments upfront. Unfortunately that is not possible in a lot of situations so you need robust procedures and systems in place for getting paid on time. The 10 tips on this list will help.