10 Ethical Strategies To Make Sure Your Invoices Get Paid on Time
Getting your invoices paid is always important for a healthy cash flow. Now we’re in turbulent waters navigating ever-increasing costs, negotiating with suppliers, and trying to navigate inflation, it’s vital!
Wouldn’t it avoid sleepless nights if you could guarantee that your invoice would get paid on time, every time? Whilst the Smart Finance Team can work wonders, we don’t have magic powers over your clients!
With the rising costs of running a business during this cost of living crisis, there is a very clear and present danger that your business invoices may not get paid on time.
Here are our Top 10 Tips for Getting Your Invoices Paid
1. Invoice promptly
The longer you take to invoice someone, the more likely the bill won’t get paid. Of course, no invoice equals no payment! Do you remember the early days of running your business? When you were shocked how lax some business owners were with their invoicing? Then, you get busy servicing your customers and clients and your business admin slips. Before you know it, you become that business owner who has become slow to invoice.
If you are finding that you are behind on your accounting and invoices, then
Tip: Cloud accounting software such as Xero, Quickbooks or Sage, all include the feature to do recurring invoices. So, where you have a regular repeating invoice for the same amount with a customer, use this recurring invoice feature to cut down the chance of missing an invoice.
2. No surprises
The more unexpected an invoice is, the more likely it won’t get paid. If a project is going to incur some extra expense or cost, always talk to your client or customer promptly about it. If you just crack on with it and don’t tell them about the additional cost coming their way, you risk getting into a payment dispute. Then the whole invoice will get held up, not just the extra cost!
Before you invoice someone, always make sure that:
- They are aware and expecting the invoice
- They have agreed to pay the invoice
3. Make paying your invoice easy
This is such a simple one but easily missed. Make sure you are removing any barriers to pay your invoice. Such as:
- Including a ‘pay now’ button linked to a payment gateway on your invoices. For example, Xero will do this for you with your Stripe account. Some customers may be happy for you to type in their card details over the phone using this option.
- Including your bank details on the invoice. (You will be surprised how many businesses and tradespeople don’t do this).
- Offer your customers the option to do a bank transfer, set up a direct debit or pay by credit card. If possible, try to avoid offering the option to pay by cheque as getting to the bank can take time.
4. Set up a Direct Debit or Payment Mandate for your clients
If you have regular customers, getting a direct debit mandate signed from them is a great way to be more in control of when they pay you. GoCardless is an inexpensive direct debit solution that integrates well with the likes of Xero and Quickbooks. Our team can help you set up Direct Debit for your customers.
5. Ask for payment upfront.
There is no rule saying you can only invoice after you start work for a client. There are times when a deposit of 50% is useful to get a commitment from your customer.
In fact, we will ask for part-payment upfront for some of our services, such as a business health check. If you (or your customers) are not happy with a 100% upfront payment, why not ask for a deposit to get the work started?
6. Be on first-name terms with your customers’ accounts payable team
It always helps to be pleasant to the person at your customer’s business who actually pays your invoice. The stronger the relationship you have with them, the more chance your invoice gets paid promptly and without being ‘delayed’. Sometimes it’s as simple as ensuring the email you send invoices from is on their ‘white list’ and won’t be seen as spam.
This may not be your direct contact. It could be someone in their finance or accounts payable team. So, who in the customer’s organisation is responsible for accounts payable? Can you get their name and contact details to help ‘ease the way for your invoice to be paid’?
7. Know your customers’ accounts payable process
Do you need a PO number on your invoice to help tally it up for speedier payment? How does the invoice need to be addressed and who to? What needs to be on the invoice for it to be paid promptly? Who at your customer’s organisation needs to sign off the invoice before it will be paid? Who heads up accounts payable? And can you get their contact details to help smooth the way for your invoice to be paid?
When a finance department is preserving cash for a business, they will reject an invoice for payment for the smallest reason.
8. Create an internal process to follow for unpaid invoices
For example, this process could include a series of communications when the invoice is issued. Then a call or email the day before the invoice is due to see when it is going to be paid. Then a series of calls or emails a number of days and weeks after the invoice is due to be paid.
Most accounting systems such as Xero, Quickbooks, Sage etc will have a feature for automated reminders for invoices. If you need more than the basic invoice chasing that this software will provide, consider outsourcing your credit control function.
9. Offer a payment plan for customers who have built up a large unpaid debt
Most customers want to pay your invoice. But sometimes stuff gets in the way.
So consider offering a mutually agreed payment plan. Getting paid in instalments over 6 months is better than not getting paid at all!
10. Stop! Hold back your delivery or services
This one may need a specific approval system in place, but don’t be the business that carries on working for a client even though they are not paying their invoices or responding to requests.
Remember Revenue is Vanity, Profit is Sanity but CASH IS REALITY!
Your Smart Finance Team will step in and bring late payers to your attention. This means that our clients know if a client isn’t paying, and can make the best decision. We see this as a last resort though after the earlier steps have been explored.
Unfortunately, we do see it happen, a business owner carries on working for a customer in the hope that the invoices will get paid eventually. The debts pile up and may never get paid. You’ll be surprised how quickly your unpaid invoices may get paid if you stop working for a client!
Don’t let unpaid invoices suffocate your business!
If you’d like a review of your invoice processes or help with your credit control or simply feel your business finance admin is getting out of control, book a slot in Tracy’s diary for a chat. Our Virtual Finance Services are flexible to suit all business sizes from micro to SME.
