One thing all business owners want is to get their company in a better position financially. One of the ways you can do this is by making sure that all of your clients pay their invoices on time. This is usually one of the main reasons why companies run into cash flow problems. However, getting people to pay on time is a lot easier said than done. So, with that being said, let’s take a look at some useful suggestions…
Add late payment fees
One option to consider is adding late payment fees for anyone that does not pay by the date you have agreed upon. Of course, you will need to add this to your terms and conditions and inform your client of this beforehand. You can’t decide to slap on a late payment simply because a client has paid late this time around and you are frustrated. It needs to be implemented from a said date and everyone needs to be informed. Charging interest is allowed and this can be the type of thing that pushes clients into paying on time every month.
Be fully aware of what your customers need
From day one, you need to discover any particulars that are required on the invoice, for example, if you should direct the invoice to a certain individual, if there needs to be a detailed breakdown of the service, whether they need a purchase order number, and so on.
Don’t let late payments drift
As soon as a payment is late, you need to call the client regularly and keep on their back until they pay you. Once a few days have passed, it is advisable to send a reminder or statement via email. If there is still nothing back to you within a week, you should pick up the phone and call the client. Don’t simply continue to send email reminders or letters via post. Speaking to someone over the telephone can be much more persuasive, as automated emails can often be ignored.
Schedule your purchases effectively
Knowing when to make purchases is just as important as getting paid on time when it comes to financial management. Read more here about the sort of equipment that could benefit your company. Purchasing items like these need to take place once you can be sure you are covered financially and all due payments have been received.
Send your invoices on time
If you don’t send your invoices to your clients on time, not only are you delaying the process yourself, but you aren’t creating a sense of urgency regarding your customers paying you on time either. You need to make invoicing a priority at your business if you are to maintain a healthy cash flow.
Research clients beforehand
Another important step in improving your company’s finances is researching clients beforehand. This means conducting due diligence to ensure that they do not have a bad reputation for failing to pay people on time.
Keep your payment terms short
A lot of business owners give their clients a considerable amount of time to pay their invoice, for example, a month, as they believe this is going to make the client more likely to pay on time. The truth is that sometimes you just get late payers, and whether your payment terms are a week, a month, or three months, they are going to try their luck. If you have already provided your services or products, why should you need to wait four weeks anyway? Make your payment term a week and ensure you keep to the deadlines you promise your clients too.
Provide varied payment options
If you put barriers in the way in terms of payment options then you are going to find that some clients take longer to pay, as it may be difficult and inconvenient for them to pay you in the manner you have requested. You should always give your customers the option of paying electronically if you want to receive your money on time, as this is the quickest and easiest payment solution.
Say ‘please’ and ‘thank you’
You may think that this is a fruitless task, but by adding ‘please’ and ‘thank you’ to our invoice you can actually increase the chance of it being paid by more than five per cent according to Freshbooks. If you don’t practise good etiquette, you may find that you end up on the bottom of the ‘to-pay’ list.
Make sure your payment terms are clear
Don’t overcomplicate things with lengthy and confusing payment terms. Keep things simple. If you want your clients to pay within seven days, simply state ‘payment must be received within seven days.’ There is no need to make things confusing.
Hire an accountant
One of the best ways to ensure that your invoices are handled efficiently is to hire an accountant. By doing this, you can have the peace of mind that everything is being dealt with in a timely and professional manner. It is advisable to look for a fixed fee accountancy service, as you will know exactly what you need to pay every month and this will be a lot easier to manage.
As you can see, there are a number of different ways that you can improve the finances at your business. Follow the tips above and you should notice a difference. Good luck!