Research has shown that 62% of invoices take 60 days or more to be paid. Unless you’re up for having to deal with the long and expensive legal process of retrieving what you’re owed, it’s best to work with your clients beforehand to prevent late payments from occurring.
Though sometimes, despite your best efforts at communication and understanding, a customer just doesn’t pay you. You know what happens to you when you pay your credit card late: You get a late fee added to your balance. Can you do that to your customers? How can you charge the late payment of your invoice?
Here are some things you need to consider:
- Make it a part of your contract or agreement with your customer: Clearly state the payment terms, including if you will charge a fee for late payment of your invoice and how much that fee will be. Some companies use a flat fee for late payment; some use a percentage. Either is fine as long as you spell it out in your original agreement.
- Present the terms and any late fee rules on the invoice: Make sure there is an easily visible due date. If you’re going to charge a fee for late payment, don’t bury that notice in the fine print. Show it clearly on the document. Your customer may vaguely remember what he agreed to when the deal was made, but the specifics are likely lost in the hustle of daily life. Take this chance to point out the terms in an unmistakable way.
- Make sure your customer gets the invoice: If you print your invoices on paper and send them through regular mail, how will you know they reach their destinations? And if it does arrive, how do you make sure it gets to the right person? The answer is simple. Use email to send your invoices. This not only saves time and energy, but it also gives you a trail to monitor.
- Send an email reminder: It’s both courteous and good customer relations to remind your customer that it’s time to pay. Like you, your customer is busy. She’s involved in taking care of her business. An email reminder that payment is coming due is probably very much appreciated. You might cite that late fee policy in your email. Nobody likes surprises.
Automation is the easiest way to handle all of your Accounts Receivable activities.
InvoiceSherpa is a leader in the A/R Management arena. With custom rules and templates, you can set InvoiceSherpa to automatically add the late fee according to the terms of your agreement with your customer. You can customize the system to send the invoice to the correct person, send reminders when payment is due, and offer a hearty thank you when payment is received.
The threat of Late Fees may help your customer to pay more quickly, but another great tool is a discount for early payment. If your terms are thirty days, for example, offer your customer a one percent discount if he pays in 15 to 20 days. Maybe you could offer an even bigger discount if she pays even more quickly. Do you want $1000 in 45 days from now or $990 right now? I’ll take the money right now, thank you.
Another great way to get paid quickly is to include a Pay Now link in the email. InvoiceSherpa provides this service too. According to Harvest, an emailed invoice with a payment link gets paid twice as fast as an invoice sent through snail mail.
Make sure to discuss Late Fees and Discounts with your CPA or Financial Advisor. There may be rules specific to your city, county, or state. Once you know the regulations, apply them with an automated Accounts Receivable system. There is no easier way to get your money than with InvoiceSherpa. Set it and forget it. The software does the work for you. And who knows? Maybe you’ll never need to charge a Late Fee again!