Hat tip to Steven Depolo for the photo.
Being paid late, or not at all, is not only frustrating but also potentially ruinous. Small businesses in the UK are, on average, paid 21 days late, and late invoice payments are harming young US businesses too. Get paid on time, every time with these 10 top tips:
- Be polite. The simplest things are often the best. FreshBooks’s study into the various terms used in invoice payments finds that little phrases like ‘please pay your invoice within…’ and ‘thank you for your business’ can make all the difference. Not only does politeness tend to get you paid faster, it can also increase the percentage of invoices paid by over five percent.
- Be specific. The same FreshBooks study finds that clear, specific phrases like ‘please pay within 21 days’ means the invoice is paid faster than when the more cryptic ‘payment terms: net 30’ or ‘pay upon receipt’ are used. Providing a specific time frame sounds more human and focuses the client’s mind. Interestingly, the study finds that 21 days is the ‘magic’ time frame for getting the highest percentage of invoices paid back and paid back faster.
- Use interest on late payment. The study also finds that threatening clients with interest on late payments tends to get you paid slower, but means a higher percentage of invoices are paid. So you should apply interest to late invoices according your specific business needs – do you need a steady cash flow, or is it more important that you get every penny?
- Offer incentives. Rather than interest, why not positively reinforce the importance of speedy invoice payment? Offer discounts to those clients who pay within a set time limit. For example, offer a reduction of five percent if the invoice is paid within five business days of being issued.
- Get it right. Don’t be the reason you’re not getting paid. Ask your client what information they require and make sure they are aware of the terms from the outset. Develop invoice templates for each client to make the process more efficient. Ensure your invoices are properly formatted, provide all the necessary details and send it to the right person first time.
- Get into a routine. Get into the habit of invoicing clients at a set time, every time. If you do, they’ll always expect the invoice and may contact you if you fail to send it. Wave finds that emailed invoices are paid faster when sent between seven and nine in the morning and evening because people tend to read emails on their way to and from work.
- Provide multiple payment methods. If your clients have various options for payment – PayPal, credit and debit card, cheque, bank transfer, etc – they’ll be more likely to pay and pay faster, particularly online.
- Audit your clients. Review the average time it takes for each of your clients to pay and focus your attention on the chronic late payers. If you’re worried about a particular client, consider running a credit check on them to ensure they can pay for the work agreed upon before you find yourself out of pocket.
- Don’t work until paid. You wouldn’t let a customer walk out of your shop with a TV on the promise of a future payment, so why should it be any different for any other business? When it comes to troublesome payers, don’t work or don’t complete the work until you have received at least part of the payment.
- Be prompt with invoices. FreeAgent finds that companies that send the invoice to the client within a week of the work being completed get paid within five days on average. Those companies who issue their invoices later risk waiting much longer for payment.
And remember, ‘do unto others as you would have others do unto you’. People in late-paying glass houses and all that.