Small and medium businesses sometimes have a hard time getting paid. So what you can do to get your invoices taken more seriously. It all starts with invoice payment terms.
What are invoice payment terms? Invoice payment terms spell out how you expect to be paid, and might include details like:
accepted forms of payment (maybe you won’t take credit cards)
the currency you deal in, if you work across borders
late-payment penalties, if you charge them
But perhaps the most important payment term of all is the due date. When do you expect to be paid? Businesses used to always give 30 days but that's changing.
Long payment terms are a throwback to the days of snail mail and payment by cheque. But now that businesses send invoices electronically and most payment is made online, 30-day terms are obsolete.
Short payment terms get you paid quicker although invoices with short payment terms are more likely to go past due, you still get your money sooner than if you give three or four weeks to pay.Â
You needn’t feel bad about giving shorter invoice payment terms. Close to 75% of invoices ask for payment within 2 weeks, so expectations are changing. Some customers may expect longer payment terms for bigger bills, but you may be able to negotiate with them. If they ask for a discount, for example, consider requesting faster payment in return.
If you're serious about the work you do, and you hustle to meet your clients' deadlines, there's no reason why you shouldn’t be paid within a week.
7 Tips to Getting Paid Sooner Getting paid and having a healthy cash flow is the lifeblood of every small business, but it’s not always as easy as sending an invoice. Here are 7 practical tips to help you get paid sooner:
Discuss payment terms before you get started Getting this sorted upfront means that there’s no confusion down the track. It also sets the client's expectations around payment before you start the work.
Keep detailed records of inventory and time Don’t work out your costs at invoicing time, as that will just slow you down. Keep a running record, so the numbers are at your fingertips when you need them. You’ll also be less likely to miss something this way. And if costs are going over budget, you can let your client know, instead of sending them an expensive surprise at the end of the month.
Make the invoice clear and easy to understand List the details of the job in a way that makes sense to the client – any confusion could create a payment lag. It’s also good to personalize your invoice with your business logo – it helps carry on the professionalism of your work.
Address the invoice to the person paying Make sure your invoice goes straight to the person who makes payment to avoid getting lost in someone else’s inbox. That will probably be different from the person who ordered the work,. If you’re unsure exactly who’s in charge of accounts, give them a call – it pays to know the person paying the bills.
Invoice as soon as possible Send your invoice as soon as possible, the sooner a client receives an invoice the sooner they will make payment. It also means they will receive it when the value of your work is still fresh in their mind. Accounting software that lets you create professional recurring invoices will streamline the invoicing process.
Keep talking to your debtors The squeaky wheel gets the oil. When things become overdue send reminders, monthly statements or make a phone call. It will help remind your client that you are serious about getting the invoice paid. Some accounting software sends you an update when the invoice has been opened.
Add 'overdue' fees If you've set your payment terms out clearly on your invoice and the client has ignored them, you’re entitled to charge interest in the form of overdue fees. Be prepared for robust feedback from your clients if you go down this route, and consider reversing the charge once the lesson has been learned.
Creating an invoicing system that works You may have made your first invoices in a standard software package like Microsoft Word. As you grow, however, a business’s invoicing needs become more complex. Think about how you can create a system that incorporates these tips, speeds up invoicing, and improves cash flow into your business.
Billing software can help. As a bonus, it generally comes as part of an accounting software package, which means your books are automatically updated as invoices are issued and paid.
You can spend up to 10% of your work time creating, sending and chasing invoices. That can cause a drag on your other administration work, so be sure to factor this into your planning and accounting strategies – and set up the most time-efficient systems you can.
Being a small or medium business owner often means you’re short on time, but it’s worth making the effort to get your invoicing set up properly. Having a streamlined invoicing process can drastically reduce the amount of time you spend collecting your hard-earned money. And that’s got to be great for your business.
For assistance with invoicing and setting up streamlined automated processes call Jess at Anytime Assist Bookkeeping on 0431604609.