Get Paid Faster for a Job Well Done.
Taking steps to ensure your customers pay promptly should be a key priority for your business.
When clients consistently pay on time, you are able to pay your vendors, suppliers, and employees on time and you’ll have an up to date view on the profitability of your business.
This requires that you also implementing strategies to support prompt payment and make it easy for customers to pay as soon as the bill comes in.
Provide payment terms up front
Before you start working with any new client, always provide your terms in writing. Clearly state your rates, payment due dates, and policies for late payment – including any fees incurred on balances owing.
If you’re currently preparing your invoices manually, switch over to an accounting system with automated billing.
We recommend using cloud accounting systems. The systems are quick and easy to use and efficient for bookkeeping, says client liaison manager Tammy Porter
“Because Xero and MYOB are cloud based programs, the bank feeds are live. You can see transactions as they occur and we as the accountant/bookkeeper can also log in and see your current position.” Tammy said. “This also helps us provide the most appropriate business advice based on accurate and current figures.”
Both Xero and MYOB have some great options for getting paid faster and following up payments automatically. Use apps so you can invoice on the spot from your phone. You’ll never forget to invoice a client, and you’ll save time.
Always make sure the contact information on your invoice is complete to avoid delays with processing.
Call your customer immediately when a payment is past due.
If you are confident that you have provided a high quality service and a competitive rate, you should be equally confident to ask for prompt payment.
Ask for the status of the invoice and if there’s anything you can do to speed up payment. Can you take payment over the phone? Do they want another invoice sent? What is their preferred method of payment and how can you facilitate that?
Get feedback from clients on what might make payment options easier for them. Sometimes a simple change, like including a purchase order number on the invoice, can speed up processing.
Net 30 day payment terms are fairly standard in business, but there’s nothing stopping you from asking for payment sooner. Long payment terms means it is more likely an invoice will be lost amongst emails or piles of mail. Some business owners make payment due at 7 or 10 days; others stipulate payment is due upon receipt of invoice.
If a client has asked for a service, they should have budgeted for that service. The longer the payment terms the more time there is for other bills to come in that may trump yours.
Get paid upfront
Collect a partial deposit – or the entire amount in full – before you provide a product or service to your customers. If you specify this before providing goods or services the client will be prepared and ready to make the payment upfront.
Forego invoicing altogether by having your customers pay on the spot with mobile debit and/or credit payments. Of course invoicing and bookkeeping are still part of the process so make sure you have an efficient system in place.
Stay on top of AR
Monitor your accounts receivable on a weekly basis so you can act fast if a customer hasn’t paid on time. An AR aging report can help you easily track outstanding invoices right in your accounting software – or create an Excel report you can track manually, if you prefer. Use apps such as EzyCollect to help you keep on top of things.
In case of non payment
Unfortunately some debtors become bad debtors. In this case you need to have a strategy in place as to how you can achieve payment in a professional and effective manner.
Stop your supply of products or services until you receive payment. With this tactic you’ll avoid the accumulation of an even greater loss with a consistently late or non-paying client.
As part of your terms, you can specify that if a client’s payment is past due, a weekly fee of 2% will be added onto the total until funds are received in full.
Perhaps the most important tip for encouraging prompt payment is excellent communication. Debtors tend to know which of their accounts are a soft touch and which will chase them hard so best to make sure your business is not an easy target.
When you follow up on a late invoice, explain why it’s important to receive timely payment in order to run your business effectively. Ask when you can expect payment, and agree on a date.
If the money still isn’t forthcoming, offer to negotiate a payment schedule as a next-to-last option – before you have no choice but contact a collection agency.