Reducing the time it takes to get invoices paid
When your business is wrestling with cash flow issues, the time it takes for invoices to be paid is normally identified as being one of the main reasons why. Britain has always had a problem with late payment – it closes perfectly viable businesses and stunt growths in those who have the cash (or access to finance) to ride through the storm.
But what can you do to get your clients to pay you faster? Maple Accounting investigates.
You have more control than you think.
You send out your invoice when you have provided a product or a service for a client to their satisfaction. What that tells you is that they need your expertise just as much as you need their money. This gives you more bargaining power than you might expect when you start to negotiate the terms of working together.
From the outset, tell your clients how much you will need to be paid for your work when you expect them to make that payment and the procedure that you follow if they pay your invoice late.
You will have to employ some tact here though. Being overly confrontational about invoices before your client has even agreed to work with you will not look great and may actually act as a deterrent to someone agreeing to buy from you.
Four tips to reduce the time it takes to get paid
Here are our 4 top tips on how to reduce the time it takes to get paid on your invoices:
Keep good records
Chasing late and unpaid invoices become a lot more difficult if you haven’t been keeping track of who owes you money and when they are due to pay.
By keeping better records, you will have a good idea of when invoices are due and when you need to start chasing your clients up on these payments. This will help you reduce the number of invoices that go unpaid for extended periods of time.
Rework your actual invoice
You need your invoice to be short, concise, and easy to understand. If your clients can’t work out when they need to pay you or even what you’re charging them for, you have no other option but to give them the benefit of the doubt.
A clear invoice can help build your case in the event that they don’t pay you further down the line.
Send the invoice as soon as possible.
You need to be prompt in sending your invoices out. The longer your customers wait for their invoices, the longer it will take to be paid. Additionally, if you send out the invoice later than the client is expecting, this can give off the impression that you aren’t in a hurry to receive the money.
Create an effective chase-up routine
No matter what you do, sometimes clients just delay paying their invoices for too long. This is where an efficient chase-up routine that you adhere to can be very effective.
Create a list of actions that you take depending on how long it has been since you issued and sent out your invoice. For example, you could email the day that the invoice becomes overdue, give them a phone call one week after, and write them a formal letter in another week’s time.
Offer card payments
A recent study in four countries by online bookkeeping firm Xero discovered something rather surprising. In the UK, if you send out an invoice and only offer cheque or bank transfer as payment options, invoices would be settled, on average, 38 days after issue. If you offer a credit or a debit card option, this halves to 19.