When you run a small business, you and only you are responsible for making sure you get paid on time. And that’s not always easy. Companies are taking longer than ever to pay their invoices, and it can be difficult to incentivize clients and vendors to pay any earlier than they have to.
But, with the right software and strategies, you can get your invoices paid sooner, and even substantially mitigate the risk of them going unpaid altogether. Let’s take a look at some of the best ways to get your invoices paid ASAP, so your business can enjoy the strong cash flow it needs to thrive.
1) Use the Right Software
The first step to getting your invoices paid sooner is to use the right billing, timekeeping, and accounting software, or the right combination of apps that will allow you to efficiently invoice, send payment reminders, and track payments received. If you bill based on time and materials, you need a time-based billing system that allows you to easily generate invoices and import invoice data into your accounting software. If you’re using customer relationship management (CRM) software to generate quotes to order, you need the capability to import that data into your accounting system. And, of course, you need an invoicing app that allows you to personalize your invoices’ email cover letters, generate automatic invoices, generate late payment reminders, and accept multiple forms of payment.
2) Get a Deposit Upfront
Most clients will pay on time, and many clients who don’t pay on time aren’t intending to stiff you, but probably just forgot to send the payments. That’s why it’s important to send late payment reminders and chase up late payments. But there are some clients who have unethical intentions from the start, and some who may have intended to pay initially but, for whatever reason, can’t come up with the cash when payment is due.
To weed out clients who don’t intend to pay their bills, ask for a deposit upfront. This is common practice among, for example, creative freelancers, who are at high risk of not getting their invoices paid. It’s also common among contractors who need to buy supplies before they can start the job. Don’t be afraid to ask for a deposit of 10, 25, 30, or even 50 percent of the final cost, as a show of good faith. If you want, you can even ask for the entire payment upfront. This will keep your cash flow healthy and protect you from those who don’t intend to pay.
3) Offer an Early Payment Discount
In a perfect world, clients would pay your invoices as soon as they receive them. But this isn’t a perfect world, so to get your invoices paid before the due date, offer an early payment discount.
Often, clients delay paying their invoices for as long as possible because they’re hoping to keep their own books in the black by hanging on to their cash as long as possible. Offering an early payment discount gives businesses an incentive to pay sooner. A discount as small as two percent for payment within 10 days, for example, can encourage clients to feel better about paying immediately, and that will help keep your own cash flow healthy.
4) Bill the Right Person
Payments are often late because the invoice wasn’t addressed to the person who cuts the checks. Make sure you know which contact is responsible for processing and paying invoices, and send your invoices directly to that person. Ask about your client’s invoicing procedures and follow them. You may need to send your invoice on paper, through an electronic payment portal, or via email. There may be multiple people who need to approve your invoice before it can get paid — talk to your primary contact about who you need to CC in order to get paid as quickly as possible.
5) Include All the Right Details
An invoice that gets paid quickly is one that includes all the relevant details your client needs: order/contract number, your company name, your employer ID, your address and contact information, the name of the project, an itemized list of services rendered or products provided or other work done, and the total amount due. If necessary, confirm with the client what information they require from the invoice to prevent payment delays.
When you run a small business, getting your invoices paid can be a challenge. It’s possible to get paid, not only on time, but early. It’s mostly a matter of making early payment easy for your clients.