If you’re struggling with late payments, and about half of small businesses are, here are some simple tips to try.
Invoice without delay
Your customer can’t pay until you've invoiced them, so make sure you send your bill promptly. Customers are also more open to paying when they've just received the goods or services that you delivered. Cash in on the goodwill by invoicing as soon as possible, there's no reason to delay.
Include all the information
Make sure your invoice has all the right information, including a description of the work or product, the date it was delivered, and any customer requirements such as a purchase order number. Some customers have very specific requirements so ask what they need to see on the invoice. Make the due date and payment terms are clear too.
Ask for prompt payment
Customers used to get weeks to pay invoices, but that's changing. More than a third of businesses now request payment within a week. Consider doing the same. Starting off at seven days will help set an expectation of prompt payment. Most goods and service providers have already provided their part of the transaction so expecting payment on delivery is fair.
Make paying on time worthwhile
Many businesses charge fees for late payment. If you'd like to try that policy, make sure it's clear on your invoice. Include a line saying something like: “Late fees are assessed after the due date, at the rate of 1.5 percent per month.”
A more positive approach is to offer a discount for prompt payment. The lure of saving money is a powerful motivator, even if it’s just a few percent discount. You can present it like this on your invoice:
Total due: $4,022
Save 5% if paid by 7 December: $3,821
Be easy to pay
Customers will pay faster if they can use their preferred method to hand over the money. Consider whether you can offer them a variety of options, like a credit card or PayPal. There are so many online payment services you can add-on to your accounts software, so there really is no excuse to not be able to add various payment options.
Your job's not done when the invoice goes out the door. You'll need to follow up with the customer to make sure it’s being processed. If the invoice goes past due, it's time to make a phone call. If this is not your thing, we all hate asking for money even if we have earned it, then try out debtor software that does the hard work for you.
Talk to us about your invoicing systems, payments services, and debtor options. We can help you get paid faster.