If your business issues invoices to customers, you are probably familiar with the problems associated with delayed payments. Late payments can impact your cash flow and slow business growth. In the worst-case scenario, it can lead to business failure.
According to a survey, 54% of SME businesses anticipate having their payments made after the due dates. Being paid on time is important for every business, yet many struggle with getting customers to pay on time.
Small businesses depend on timely invoice payments to meet costs and keep a constant cash flow. Here are a few tips that you should consider to improve your chances of getting paid on time.
Make your Invoices simple and clear
Your invoices can be the source of your clients’ payment issues. Poorly written, designed, and overly complicated invoices may cause clients to pay you late. It could be difficult to find the relevant information, which could confuse your customers. For this reason, you must ensure your invoices are easy to understand and have crucial information, such as the amount due and the billing date, clearly visible.
Also, ensure your invoices contain all the details a client needs, such as costs, taxes, upcharges, and overtime rates.
Consider hiring a debt collection agency
If you have plenty of debt to collect, you may want to hire dedicated services worth your buck. Debt collectors have the expertise needed to collect outstanding invoices because they deal with late-paying consumers daily. Hiring a collection agency is more practical and advantageous than having staff handle duties outside their expertise.
You won’t have to waste time tracking down your consumers if you work with an invoice collection firm. It’ll help you save time, money, and effort, and you can use these resources to optimize other business functions, such as product development and marketing.
Ensure a variety of payment methods are available
The simpler it is for your consumers to pay, the more likely they will pay on time. Offering your clients various online payment methods can improve your chances of getting outstanding invoices paid on time. According to research, businesses that offer multiple payment options collect accounts receivables 20 days sooner than companies that offer limited payment options.
While many customers are satisfied to pay online, some don’t. Ensure that you also provide offline payment options like checks and cash. This will ensure better customer satisfaction and experience and help you get your payments on time.
Ask for a prepayment before starting the project
Asking for an initial deposit before beginning a project is a fantastic approach to preventing late payments and creating a good relationship with your client. For larger, long-term projects that can take months to complete, requesting a deposit is the best approach.
A prepayment from the client before work begins ensures you have enough cash to pay for the project’s expenses. Additionally, it might assist you in maintaining a constant cash flow to cover other business needs.
Give a discount for early payment
Offering discounts to customers who make early payments is a smart move. Offer a 3% to 5% discount for customers who pay within the first ten days after the invoice date. This tiny incentive can encourage customers to make early payments and improve cash flow.
Remember that not all businesses should choose this option. This tactic is particularly beneficial for businesses with high-profit margins. However, it is worthwhile to attempt for a small business with cash flow issues caused by late invoice payments.
Send reminders to your clients
Send a polite email if an invoice has exceeded your initial payment deadline. You should make a phone call if your reminder email isn’t successful. This needs to be kind yet forceful. Ensure your clients know your payment expectations and establish a mutually agreeable date.
If you haven’t received payments within the agreed time, make a formal request. Legal action should be used only as a last option because it can be very expensive and time-consuming, especially for smaller invoices.
There is no getting around the fact that late and unpaid bills cause many problems for small businesses. Some customers simply don’t meet deadlines, so you might want to consider whom you work for. Establish clear guidelines for paying invoices, conduct yourself professionally, and don’t be afraid to remind your customers several times. Following the given tips can solve the issue and receive payment more quickly and on time.