When it comes to getting paid on time for goods or services that you have provided, it helps to have written payment terms, clearly defined and outlined in your terms of engagement (list the goods/service you are providing, how you customer will indicate acceptance, your payment terms and dispute resolution details), and a process in place to follow up unpaid invoices.
Nothing will hold up getting paid like haggling over the price, especially if the service is completed or the product is in the hands of the customer. It is essential the customer understands how much the product or service costs upfront. If it is possible the price could fluctuate as a result of unforeseen factors, for example, a builder cuts through a wall and it’s full of termites and now the entire wall needs to be replaced, then this also needs to be discussed up front. Being completely transparent about price will save time and ensure faster payment – clients should never be surprised by anything on your invoices.
Make sure that you issue invoices promptly and that the invoices are clearly addressed to the person who will be making the payment. The invoice should also display a due date as well as payment options. Diarise invoice due dates and once an invoice becomes overdue, follow-up with your customer immediately. Be clear with your payment advice so there’s no chance of confusion.
It’s 2020 and time to do away with paper accounting. By being able to review your debtors in your accounting software you will be able to make decisions about collection and credit extension. Most of the top accounting software products chase invoices for you depending on rules you set. Automate the invoice follow-up process with reminders out of Xero, or other debt recovery software like debtor daddy, five days before the invoice is due, then 3 days after, with a note for your client manager to call the customer once the invoice is 7 days overdue to touch base.
Use online payment services
The easier it is for your customers to pay, the sooner it will happen. We’ve written before about the benefits of online payment services like Stripe – they simplify the payment process, making it easier for your customers to pay you faster. If debtors can view and pay the invoice online with a touch of a button, they’re likely to do it sooner, and if you’re set up with Xero, the invoice payment is automatically applied in Xero ready for reconciliation the following day.
Follow up late invoices 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.
Provide an early payment discount
If you’re really keen to get paid faster, you could consider offering your clients a discount if they pay before the due date. Your clients likely have several suppliers/providers all sending them their invoices at the same time, so with a small discount you’ll jump to the top of the list. It doesn’t have to be much, either – five percent or lower is fairly standard.
Hopefully these tips are useful and help you implement some strategies to get your money coming in faster. Let us know if you have any questions or would like help setting any of this up.