Getting customers to pay on time is one of the biggest challenges for business owners and when the problem persists too long, it can ultimately shut down a small business.
For any business, the amount of money flowing in or out is critical to its success. When money is tight, paying basic bills can get challenging. But when cash is plentiful, a business can invest in its future by expanding, buying new equipment, hiring key staff or retaining key staff by rewarding them further.
Late payments are at an all-time high as SMEs wait too long to get paid. The average amount owed to each SME is now at its highest level. The result is that SMEs are going out of business due to late payments. This is totally unacceptable, as in most cases when a small business goes out of business a family goes out of business.
Here are a few simple tips to getting paid faster and to keeping the cash flowing in:
Invoice your client immediately
The quicker you execute, the quicker you will be paid. Also, if you delay the invoice, it indicates that you not in too much of a hurry to get paid. Business owners are often slow at getting their invoices out once they have completed their work for a customer. Remember that your client has no obligation to pay until they receive an invoice, so don’t wait.
Make payment terms crystal clear
You need to communicate the deadline on your quotes and invoices clearly as well as in all your telephone and e-mail follow-ups.
Incentivise for early payments
Sweeten the pot and speed up payments by offering customers a small discount for paying early. Make sure the financial trade-off is worth it before you extend this offer. You don’t want to offer a discount that you can’t afford.
Invoice smaller amounts than that big invoice
It is a known fact that it is a “human thing” to dislike paying over money. So, what we need to do is make it easier by splitting invoices, rather issue a few small invoices than that big one. This sometimes poses a problem, however if you can do it, it certainly works.
Make a personal connection with the “Money Team”
The key success factor in growing the top line is to build solid relationships with the decision makers. What we forget to do is build relationships with those in the business that pay the accounts. Get personal with the “Money Team” and get them to pay you first.
Itemise every detail
You need to itemise every item on the invoice and clearly state the unit cost of every item. Going backwards and forwards in correcting invoices is a big contributor to delayed payments.
Check that every invoice is accurate
To elaborate further, ensure that all the correct details are on the invoice before sending the invoice out. Few customers will rush to query an invoice that doesn’t look right – they just won’t pay it.
Especially when you’re dealing with larger corporate or government clients, invoices can easily get lost in a maze of bureaucracy. Never send an invoice out blind. Always make sure you know the specific department, individual, email and/or mailing address to send your invoice.
Follow-up – use the telephone to chase money
Many experts in the field agree that making phone calls can be up to 80% more effective than emails and letters. Prioritise your cash collection and chase the oldest and largest debts first. One of the most common reasons small business owners don’t get paid on time is that they never follow up on late payments. When payments are due, follow-up immediately, by which I mean “the next day.”
Always check whether a purchase order is required
Many large organisations will not pay an invoice without a purchase order. They are also unlikely to call you and ask for one. Your invoice will simply sit on a desk, not be entered into the system, and not paid. This could mean the difference between prompt payment or none at all.
Professional invoices get priority
Professional looking invoices are more likely to get attention and get treated as a priority than something that looks like you printed it out on an old printer or typed on any piece of paper you could find.
Look for invoice templates that let you create custom invoices featuring your business logo. Use bold colours wisely to emphasise the key parts of the invoice, like the total amount and the due date. Keep it simple; a cluttered, overly detailed design will only confuse the recipient.
Make the payment process easy
Offer a range of payment options to your customers and put your payment methods on all proposals, invoices and statements. For example, you might accept credit cards, debit cards, cash and EFTs. Different methods will suit different customers, so offer as many options as possible.
Article by Mike Anderson (NSBC Founder & CEO)