Late payments, or missing ones, are not only frustrating but also potentially ruinous to business relationships. Small businesses in the UK are, on average, paid 21 days late, and late invoice payments are harming young US businesses too. So here are 10 tips for getting your invoices paid on time, every time.
1. Be polite
It’s quite often the simplest things that make an impact. A FreshBooks study into the various terms used in invoice payments found that even small phrases like ‘please pay your invoice within…’ and ‘thank you for your business’ can make a big difference. Not only does politeness tend to get you paid faster, it can also increase the percentage of invoices paid by over five percent.
2. Be specific
The same FreshBooks study found that clear, specific phrases like ‘please pay within 21 days’ means the invoice is paid faster than when the more cryptic phrases are used, such as ‘payment terms: net 30’ or ‘pay upon receipt’. Providing a specific time frame is more human and focuses the client’s mind.
3. Use interest on late payment
Unsurprisingly, threatening clients with interest on late payments gets your invoices paid slower, but it does mean a higher percentage of invoices are paid. So whether you apply interest to late invoices depends on your specific business needs – do you need a steady cash flow, or is it more important that you get every penny?
4. 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 they pay the invoice within five business days of issue.
5. Get it right
Don’t be the reason people aren’t paying you. Ask your client what information they require and make sure they are aware of the terms from the get-go. It will help to develop invoice templates for each client to make the process more efficient. Ensure you properly format your invoices, provide all the necessary details and send it to the right person first time.
6. 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 found that people pay faster when you send invoices sent by email between seven and nine in the morning and evening because people tend to read emails on their way to and from work.
7. 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.
8. 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.
9. 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 with your invoices? When it comes to troublesome payers, hold off on the work until you have received at least part of the payment and be sure to clearly communicate to the client why you are doing this.
10. Be prompt with invoices
FreeAgent found that companies that send their invoices to the client within a week of the work being completed get paid, on average, within five days. 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.
Hat tip to Steven Depolo for the photo.
[Note: This post was originally published 11/09/2013 but we’ve given it a polish.]