How to Get Your Invoices Paid Before They’re DueWritten by Uwe on May 18, 2015
Many small companies hinge on the thought of a successful cash flow. As important as it is, often small businesses lapse with this. Don’t let it happen to you. This quick guide will give you some good tips on how to avoid this situation.
Payment delays can seriously hinder your company’s cash flow and for most companies there’s nothing more important than getting paid on time. If you’re looking for ways through which you can speed up payment, keep in mind that the most effective way to achieve this is keeping things simple. The most critical communication that you will have with your customer is hands down, the invoice you send to get paid. A few additions and some simple adjustments can make your invoice more effective in increasing your chances of getting speedy payment from your customers.
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A simple please and thank you can make a big difference. Good etiquettes are important in all forms of business communication whether with customers or internal employees. Thus, don’t forget to apply that to your invoices. If you want to improve the probability of your payment coming through sooner, simply adapt better manners. A survey was conducted to prove this that by simply adding the words “thank you” and “please” improved the chances of the invoice being paid by 5%. This proves this basic rule of invoicing and can really help you bring in a more solid cash flow for your company.
Try making it a habit in your company to always ask customers or clients what they “require” on their invoices. Though it might seem as a time consuming tasks especially for companies with a higher number of invoices to send in a day, but trust me, in the long run, you will be saving yourself a lot of time by not having to resend invoices which ultimately leads to delays in receiving payment. So, why not get things right the first time? Plus, invoices with incorrect information or missing data will hamper your impression as a professional and will certainly not look good in the public eye. You want to make sure that this document is representing your company as professionally as possible so your clients take you seriously and take payment of your invoice seriously.
To make things easier for you, I have put together a few questions that you can ask your customers before invoicing them to avoid this problem:
- Is it enough for your customer to have an invoice number or do they also require a purchase order (P.O) number on their invoice?
- Would you require an employee identification number (EIN) on your invoice?
- Is a general description sufficient for your customer or would they like a more detailed break-down of all the services bought?
- Is it okay to direct the invoice to the customer or should it be directed to any other individual or company?
Simply questions like these will help you understand what your customer is expecting and thus avoid any delays in payment by having to recreate the invoice.
Net vs. Days
Always be very careful of the terminology you are using on your invoice. What may seem appropriate to you as a business, may not translate the same to your customer. Confusion on what the invoice terms mean can cause delays and frustration for you customer too. If you have a lot of customers coming back to you for an explanation what “net” means on your invoice, it’s time you switch it to “days”. Simply putting down a statement saying “payment is due within 30 days’ will make things much easier for all kinds of customers to understand. The time frame stands out more as compared to when you use the term “net”. Also avoid putting down terms like “payment due upon receipt”. This clearly isn’t possible for everyone to do and forces a lot of people to come up with lame excuses like the date on which they actually received the invoice thus giving themselves more leeway. Such statements are not good in offering a strict deadline to your customers and again can cause delays in receiving payment.
If your business is not yet charging interest on late fee, you absolutely must start charging this fee. This is another great way to add a sense of urgency to your invoice. The customer will know not to let this particular invoice pile up away in their other invoices and list of bills to pay. Also make sure that your initial contract with your customer highlights this principle of late interest fee and then make sure your reinstate them in your invoices. Your customers should be made aware of what this fee percentage is and when exactly it applies. Ultimately the goal here is that your customers are well aware of the charges they will incur if they slack in payment. This is a great trick in helping ensure your payments keep flowing in on time without having to trouble yourself much with chasing payments overdue.
Just as it is important to charge interest fee for late payments, it is also a good tactic to offer your customers some sort of incentives to motivate them to make early payments. A lot of companies offer their customers small discounts if they make the full payment at an early date and in one go. If your company is of a similar nature, you too can prompt your customers to make full payments by perhaps offering them a small 1% or 2% discount. Other incentives you can offer include gift certificates, merchandise, credits, or future discounts. Play around with different ideas and see what incentive plan would work best for you. Rewarding your customers for their business shows your appreciation and also helps improve their loyalty. Again in the long run this will ultimately help you build a more solid cash flow and reward you with speedy payments of your invoices.
Using online invoicing software
This final tip is gaining increasing popularity especially amongst small businesses. There are plenty of affordable options like Invoiceberry, which have proven to help businesses get their invoices paid on time. This is definitely an option worth exploring. The benefits of being able to send your invoices through an online system far surpass those of traditional invoicing. You can achieve professional looking invoices, easily customize them, pull out reports for more insights, and enjoy many more benefits with online invoicing. All the points I highlighted above can easily be adapted and highlighted on an online invoicing system. Having a flexible system and one that can be accessed from anywhere in the world, is the solution to ensuring a solid invoicing system.