17 Oct Like getting paid? 3 Tips on how to make it happen quicker.
This blog is an adaptation of a brilliant blog which you can read here by Xero: http://bit.ly/2oZPIVT
Invoicing tips from other small businesses
Just about every small business struggles with invoicing. A study of Xero users found that:
- about 60% of invoices are paid late
- more than a third are at least 2 weeks late
It doesn’t matter where in the world we run this study – or who among our 860,000 small business subscribers we ask – the results are essentially the same. Small businesses have a hard time getting paid.
You have more control than you think
If a client doesn’t want to pay on time, it’s hard to make them. For that reason, many business owners feel powerless to improve the speed of payment. However, if you focus on the things you can control, there’s still a lot you can do to get paid faster.
Your invoice payment terms can set the tone for the whole transaction. But you can also improve your chances of prompt payment by invoicing quickly, communicating clearly and reminding clients when they owe you.
Invoice payment terms
Invoice payment terms spell out how you expect to be paid, and might include details like:
- accepted forms of payment (maybe you won’t take credit cards)
- the currency you deal in, if you work across borders
- late-payment penalties, if you charge them
But perhaps the most important payment term of all is the due date. When do you expect to be paid? Businesses used to always give 30 days but this is changing.
Long payment terms are an old-school hangover from the days of snail mail and payment by check. But now that businesses send online invoices and most payment is electronic, 30-day terms are obsolete.
If you’re serious about the work you do, and you hustle to meet your clients’ deadlines, there’s no reason why you shouldn’t be paid within a week.
Short payment terms are common
You needn’t feel bad about giving shorter invoice payment terms. Most small businesses do it now and expectations are changing. Our study found that:
- between 70 and 80 percent of businesses give 2 weeks or less
- more than half of those request payment within 7 days
Get clients on the clock quickly
It doesn’t matter how short your invoice payment terms are if you don’t send the bill on time. Whether you give 30 days to pay, or just seven – the clock doesn’t start ticking until the invoice is out the door.
Invoicing can be a pain. Other commitments and interruptions get in the way. As a result, most businesses only send invoices once every 2-4 weeks. But when you delay, you’re essentially pushing back your payday.
Try to use templates that speed up invoicing. Then you can pull up a fresh invoice, punch in the job details and costs, and send the bill quickly. A lot of software packages can do this. Some allow you to do it from your smartphone, so you can send invoices when you’re out of the office.
Don’t wait until an invoice is two weeks late before reminding a client they owe you. Try sending a friendly email as the due date approaches. Follow up again if they go past due.
If clients don’t respond to emails, pick up the phone. Don’t let it drift. It may not be the funnest part of being in business – but it could help you stay in business.
If you don’t have time for all the follow-up, consider:
- using invoicing software that automatically sends reminder emails for you
- asking your accountant if they’ll call overdue clients for you
Top three tips to get paid faster
Getting paid and having a healthy cash flow is the lifeblood of every small business, but it’s not always as easy as sending an invoice. The 1,500 businesses that spoke to Xero about invoicing offered these practical tips:
- Discuss payment terms before you get started – Getting this sorted upfront means that there’s no confusion down the track. It also sets the client’s expectations around payment before you start the work.
- Make the invoice clear and easy to understand – List the details of the job in a way that makes sense to the client – any confusion could create a payment lag. It’s also good to personalize your invoice with your business logo – it helps carry on the professionalism of your work.
- Keep talking to your debtors – The squeaky wheel gets the oil. When things become overdue send reminders, monthly statements or make a phone call. It will help remind your client that you are serious about getting the invoice paid. Some accounting software sends you an update when the invoice has been opened.
Creating an invoicing system that works
You may have made your first invoices in a standard software package like Microsoft Word. Maybe you even had to search the internet for tips on how to create an invoice.
As you grow, however, a business’s invoicing needs become more complex. Think about how you can create a system that incorporates these tips, speeds up invoicing, and improves cash flow into your business.
Hate having organise your invoicing by yourself? Fresh Figures offer invoicing as part of their packaging, so have a chat to the team today.