The problems faced by small business due to late payments have been very much in the news lately, as a business owner you are very aware of the importance of getting paid on time and that payment delays can seriously disrupt cash flow. When searching for ways to speed up payment, keep in mind that the most effective solutions are often the most simple. The invoice you send your customer is, hands down, the most important communication in regards to getting paid. With a few simple adjustments and additions to your invoices, you can actually speed payment from customers and increase your chances of getting paid.
– Please and thank you
Good etiquette is always important, but when it comes to invoicing, minding your manners can actually increase the probability of getting paid. By adding a “please” or “thank you” to an invoice, you can improve that invoice’s likelihood of getting paid by more than 5 percent. That simple adjustment could end up resulting in thousands of £’s per year.
– Customized details
Make it a habit to ask all of your customers what they require on invoices. It will take some time upfront to make these inquiries, but you will save time and money down the road if you don’t have to re-invoice a customer due to missing or incorrect information. You might want to ask: Do you need a purchase order (P.O.) number or is an invoice number enough? Do you need a detailed breakdown of services or will a general description suffice? Is there any individual I must direct the invoice to?
– Days vs. Net
By simply using the term days over the term net, will help you to get paid on time. Terms like net 30, net 60, etc. make a lot of sense on the business end, but customers don’t always know what they mean. When you include phrasing like “payment due within 30 days,” the customer immediately identifies the time frame. This is stronger than, say, due upon receipt, which gives the customer room to waffle about when the invoice was received and does not offer a strict timeline.
– Interest fee
If you aren’t already charging interest on late payments, you absolutely must begin. Late fees add urgency to invoices, ensuring they don’t end up at the bottom of the bills-to-pay pile. Be sure to reference late fees in the initial customer contract and make certain to restate them in the invoice. Let your clients know exactly what the fee percentage is and when it applies (i.e., a 2 percent interest fee will be charged per month on late payments.) This lets the customer see what additional payments they would have to make if they don’t get that invoice in on time.
Beyond motivating payment with late fees, try positively incentivizing customers to pay you early. Incentives might include a 1 to 2 percent discount if payment is received within a specific “early” time frame. Include these incentives in the invoice so the customer is immediately motivated to react to the offer. Also, consider offering future discounts, credits, gift certificates or merchandise as possible incentives. In the end, you’re saying thank you for making that payment a priority. It’s rewarding your customers for their business, increasing their loyalty, and helping you get paid.
– Include electronic payment options
You will see a much quicker response when you give customers the opportunity to pay electronically.