The total in Accounts Receivable on your balance sheet is a great number to have. It means you sold some widgets or services, and someone is going to pay you for them. It’s a clear look at your future. A nice amount of money is coming your way. That’s great! But wouldn’t it be even nicer to have that money in your bank account now instead of in your future? While you will probably get that money eventually, how can you shorten the time it takes?
Like in all things, start with good Communication. Are your terms clearly stated on your invoice? Did you include your payment terms in your contract or engagement letter? Don’t make your customers guess when you expect to be paid. Even worse, don’t give them an excuse not to pay at all. If you expect to be paid in 30 days, say so - in your original agreement and on your paperwork. If you don’t, you give them an invitation to procrastinate. Make it easy instead.
Who pays the bills? This is an important thing to know. Make sure your invoice goes to the person who can actually do something with it. Maybe you have a great relationship with the Marketing Director who approved your services, but she is not likely to be the one who writes the checks. Find out who that is, and get your invoice in front of him or her.
Offer a Discount - Many people will pay early if they have a nice incentive. What’s that worth to you? One or two percent of the total may seem like a lot to give up, but what if it saves you money in the long run? If you don’t have enough cash flow to pay your credit card in full, what is the percentage you’ll pay for only making the minimum payment? The average credit card percentage rate is 17.21%. Would you give up two percent to avoid 17.21% in extra expense?
Even if you don’t have bills looming over you, it’s still better to have that money in the bank. What’s your peace of mind worth? Do you want to worry about what might happen if your customer doesn’t pay, or do you want to relax, knowing that you did the smart thing to make those funds available sooner?
Send Reminders - Some people see a deadline 30 days in the future and forget about it. That’s not on their radar yet. Thirty days from now seems way off in the distant future. But a friendly reminder brings that deadline back to the front of their minds. Sending a reminder a few days ahead of the due date can get the results you want. It also gives you another chance to communicate with your client. Maybe your reminder has a link to your latest blog post or a notice about an upcoming special sale. Your reminder serves the dual purpose of giving you the chance to let your customers know what’s going on in your business in addition to reminding them that it’s time to pay.
Add a Late Fee - The late fee works on the same philosophy as the discount for early payment. Everyone wants to avoid extra expenses. If your customer knows you will add a fee to a late payment, he or she has an extra incentive to get your money to you on time.
Make It Easy to Pay - When you have bills to pay, which ones get your attention first? It’s probably the ones that are easiest to deal with. If you want to get to the front of your customer’s bill pay line, make it painless. As easy as clicking a link. You can do that if you send your invoice via email with a Pay Now link. When all he has to do is click a link, your customer doesn’t need to even think about the task. If your payment software allows your customer to safely store his payment data, that’s even easier.
InvoiceSherpa has already thought of all of these things for you. With customizable email templates, you can easily remind your customers when it’s time to pay. The online payment link makes it easy. You can also set up thank you emails that let your customer know you received the payment. And it gives you another opportunity to let them know how much you appreciate their business. Money in the bank beats money on your Balance Sheet every time.