By David Egerton-Warburton
On the face of it, paying bills slightly late doesn’t seem like that much of a problem. However, when every business is doing the same, there is a knock-on effect that impacts everyone’s cash flow, business survival and even the economy as a whole.
Not all is lost however, because there are ways to help speed up invoice payment time. Here are eight of the best:
1) Make sure your invoices are clear and understandable
This is a surprisingly common mistake many businesses make. Ensure all details are correct, easy to understand and there is no ambiguity that will result in a call from your client’s accounts team.
2) Offer clients easy payment methods
Everyone is busy these days and we all want the most convenient way to get things done. Are you stuck with what has been the company tradition and only letting people pay by cheque or money transfer, for example? Why not allow payment online with a credit card, through PayPal or Google Wallet, or BPay by phone?
3) Invoice online
It’s true that online payments are now commonplace and the same is true for online invoicing. Still, plenty of businesses are spending the time posting out a paper invoice, which naturally includes more costs and takes a far longer time.
Instead, send it online. The accounts team will receive it immediately and there’ll be an electronic paper trail so you will know where your account went.
4) Positive incentives for early payment
While this may not suit all businesses, an early payment incentive is a carrot that many customers will jump at. If you offer positive reinforcement that the customer will get something pleasant out of paying as soon as possible, you will save yourself time and heartache in chasing down payments.
5) Make sure you have a contact person
Sending the invoice to the busy CEO will often see the bill get temporarily waylaid and potentially lost in the system. Make sure you have the name and direct number of the relevant person you need to speak with. This will often be a different person to the one who organised the work.
6) Invoice as soon as possible
While most businesses request payment within 30 days, it is a rare occurrence to be paid in this timeframe. Send your invoice as soon as possible because the sooner your supplier receives the invoice, the sooner your business will receive payment. You are not being unfair or rude by asking to be paid for work you have completed.
7) Have a standard procedure to follow-up overdue accounts
Don’t wait until things spiral out of control and there is a cash flow problem in your business. Put together standard procedures to ensure payments are followed up in an efficient and timely manner.
Firstly, don’t wait until the account is a month overdue; send a friendly but firm reminder, and follow up again with a phone call if the account is still left unpaid. Create a standardised script for these follow-up calls and emails.
8) Explain your terms up-front
Put everything in writing, either in a contract or in a statement of terms. This way, the client cannot say they were unsure of procedures.
A cash flow crisis is frequently cited as the reason for business failure. Don’t let this happen to your business. Create standard, efficient procedures to keep yourself ahead of the game. Why not give Reep a try? With live access to your financial data, Reep is software that creates cash flow forecasts updated in real time. Try the free Reep trial here.
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