8 Invoicing Tips for Businesses to Get Paid Faster
In order to keep cash flow to your business in a healthy state you have to make sure your invoices are getting paid on time. For novice business owners however, this can be quite the challenge since they often find themselves chasing clients for payments.
Little do they realise that a lot can be done to encourage clients to pay faster, in some cases even before the due date. Being diligent and following the invoicing tips mentioned in this post, businesses can get paid faster and maintain smooth cash flow.
1. Send Timely Invoices
For businesses that don’t have formalised accounting departments, sending invoices in a timely manner might be a tough concept to grasp. But the fact of the matter is, the quicker you send your invoice the quicker it’s going to get paid.
Ideally, you should be invoicing your clients as soon as the products/services have been delivered. Here are the reasons why you should do this:
- Setting expectations: You want to project a professional image of your business and sending invoices immediately shows you take money matters very seriously. This will build expectations with clients accordingly, and they’ll be inclined to pay you faster.
- Value of products/services: Another reason why you want to send invoices immediately is that the value of your services/products is still fresh in the client’s mind.
Most business owners delay sending invoices because it’s usually a cumbersome process. But with a specialised invoicing software, it really isn’t. Once you have the software set up to generate the kind of invoice you want, it’s only a matter of putting in data and pressing a couple of buttons, and you’ll have a professional invoice ready.
2. Set Clear Due Dates
Don’t leave it up to the client to decide the due date of your invoice! Having clearly mentioned due dates for invoice payment will communicate that you want the cash by a certain time.
There’s some technical terminology for this. For example, writing “net 30” means that the invoice must be paid 30 days from the invoice date.
Novice business owners don’t even need to use this terminology. They can simply write “Payment due on DD/MM/YYYY” for absolute clarity. With this the client won’t have the excuse of not understanding the terminology as well.
It’s also recommended to write full month names to avoid ambiguity, such as “February 3, 2020”.
Don’t leave it up to the client to decide the due date of your invoice!
3. Avoid Extended Due Dates for Payments
It’s good to be flexible when it comes to payments. You don’t want to give your clients a two-day window to make payments. But you don’t want to give them too much time as well.
Do not give your clients the freedom to pay late, as they’ll naturally gravitate towards this option. A balance must be struck here, with a payment term that’s short but relaxed enough that the client doesn’t feel flustered by it.
4. Impose Late Payment Penalties
This may sound a bit harsh to some business owners, who often have cordial relations with their clients. But hey, this is the lifeline of your business we’re talking about.
Imposing some kind of penalty on late payments can be a great motivator for clients to pay on time. For example, you could add a certain amount of interest on the payment if it’s paid after the due date.
In fact, having these terms means that the client will often make the payment much before the due date, out of caution.
Don’t forget to communicate these late payment terms to your clients beforehand.
You don’t want to appear brash about late payment penalties, so here’s the correct way to do it:
- Clearly include a section on late payment in your invoice.
- Communicate and agree on the late payment fees with your clients in advance (beginning of project).
5. Incentivise Fast Payments
The goal of effective and efficient invoicing is to optimize the cash flow of a business. To get payments as fast as possible, you may want to incentivise clients who choose to pay you on time.
For example, you could offer a small discount to clients who pay ahead of the due date. You could also offer them a gift card of some sort – you get the idea.
6. Break Down Larger Invoices
You may be working with businesses that just don’t like to pay large invoices, for a multitude of reasons.
In this case, you can try breaking down invoices into several instalments. Instead of sending them an invoice for a large sum of money after 60 days, send them invoices after every 15 days, with smaller amounts.
This will work well for both you and your client because:
- You’ll get regular cash inflow.
- The client will find it easy to process smaller invoices.
7. Send Friendly Reminders
Have you heard how email follow ups can dramatically improve the reply rates of email campaigns? The same goes for invoicing as well. Your client may have received the invoice but simply forgot to pay it.
This is why sending friendly reminders as the due date approaches is a good idea. You don’t have to demand that the client pay in these reminders, but rather make them aware of the fact that the due date is fast approaching.
Some business owners even use these email reminders to open opportunities regarding upselling products or services to the client. Be creative!
8. Treat Your Customers Well
This is the most basic tip we can give, but also something that’s important. Delivering quality products or services to your clients is a great motivator for them to pay you on time.