Getting your invoices paid can be an absolute chore, but of course it's pretty integral to business. There are stats and stories galore about how lack of cash causes businesses (especially young businesses) to crash; essentially, unpaid invoices are bad news.
Luckily, technology has moved on in the last few years so you can give your customers more options on how they pay your bills. Couple this with some solid accounts receivable practices and problem payers should be a thing of the past.
Firstly, let’s look at the technology
Most cloud accounting software allows you to embed a payment link or button on the invoice you send to customers. Your customers can then can just click on the button and pay using their credit or debit card or using PayPal. You’ll need to sign up to a payment provider (i.e. Stripe) and they take a transaction fee but you and your customers will love the simplicity of it.
DDs used to be only for larger corporations but now its open for all. Service providers like GoCardless allow you to set up direct debits for customers and if you link this with your cloud based accounts package the drawdown from customer accounts will be linked to the invoices issued, taking all the hassle out of payments.
Cloud based invoicing
This covers a lot of bases. Firstly, sending invoices promptly has a better result in getting payment then sending an invoice a couple of weeks after the job has been done. Most cloud based packages (Xero, Quickbooks, AccountsIQ etc) have an app which allows you to issue invoices wherever you are so there is never an excuse to be tardy.
Secondly, sending invoice via email (as you will do from your cloud based accounts package) reduces the chances of invoices getting lost and is much quicker than post.
Finally, a cloud based system can generate payment reminders if a payment for an invoice hasn’t been received so you will always be on top on an account.
You should be coupling the above with some solid accounts receivable processes;
Agree payment terms upfront and ensure you are sticking to these by informing your customers when payments are falling due and when they go overdue. When payments are overdue send emails, pick up the phone or have a chat over coffee, just make sure you let them know and chase up your money. Good communication and a good relationship with your customers is often the most important factor when getting paid.
You want to keep queries to a minimum so ensure you have included enough information on your invoice to satisfy customer queries - queries from customers will add days to the settlement.
A study carried out by due.com found that your invoice is more likely to be paid on time if it contains your logo, has a due date on it, has your payment terms included and is only sent to one recipient, not multiple recipients. (They also found that you are more likely to get paid on time if you have ‘please’ or ‘thank you’ on your invoice - we’re not sure about this one, but it’s nice to be nice).
The big guns
The work has been done, everyone is happy, but your customer is still not paying. You’ve still got plenty of options to encourage payment, but these can damage customer relationships;
Interest/penalty - if you have late payment penalties included in your terms you can charge them (or threaten to charge them) on late invoices.
Withhold goods/services - if the customer is still engaging you, you can suspend services until old bills are paid - often a very effective way to motivate payment
Business admin is one of the last things a business owner wants to get bogged down in and invoice admin can be particularly painful. If you’re not yet using a cloud accounting package, you should really consider it as (as the above shows) it can save you a lot of time.
Not sure you’re ready to splash out on a new accounting system? Take a look at our blog on free accounting software
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