Do the invoices you send never get paid on time and are always late? Yikes! Let’s explore a process you can use to make this problem go away.
First things first: why do some customers fail to pay on time? It’s important to understand the root of the problem before you can tackle a solution. Oftentimes, the biggest issue is simply the expectations that were set in the first place.
In this article, you’ll learn 10 ways to ensure that your invoices get paid on time, every time! Let’s get into it.
#1 - Set Clear Expectations, Up Front
When you're first starting to work with a client or talking about your exciting services and the awesome things you can do for your client, it can be hard to think about payment terms, invoices, and all of that boring stuff.
Discussing expectations can be difficult, but the truth of the matter is that it’s necessary for both you and your client to end up satisfied with the business relationship. Not to mention, you work hard to get clients interested and don’t want to ruin the sale. But remember- it's not really a sale if you never get paid.
Such a discussion should never be the very beginning of the conversation, you should always make sure that it’s discussed at some point. Just remember, without giving your client clear expectations on how and when you expect to be paid, you can’t really expect them to pay you on time!
According to the Export-Import Bank of the United States, over 60% of invoices are paid late. This has a domino effect on your business, and it’s essential that clients understand that on-time payment is expected.
#2 - Invoice Promptly
Don't wait any longer than you have to invoice for your work.
A lot of larger companies have payment cycles and won't pay you on time if your invoice comes in after their cycle date. These cycles can be as far out as once a month, so keep an eye out for this small but important timing detail.
People get busy and things fall through the cracks, and even a small mistake could end up putting your business in a tough cash flow spot.
Good customers can be just as careless as the less than ideal ones, so make sure that your clients are getting their invoices as soon as possible to avoid any possible oversights on your part.
#3 - Manage Properly
The reality is that businesses large and small are going to have to manage their invoices and follow up. Every hour you spend hounding clients about invoices is one less hour you get to spend working on your actual business.
At the bottom line, chasing invoices costs you money, so make sure your invoicing is properly managed and automated to save you as much time as possible.
#4 - Follow Up Early and Often
Like all people, clients can be forgetful. Make sure they know when their invoice is ready and many will pay right away.
But, you can also use reminders to cover the rest of the spectrum. Don’t shy away from sending reminders a week or a day before the payment is due. It will ensure that the client is prepared to pay, or reminded to pay right then and there.
A study conducted on an aggregated basis shows that over the last 6 months, the average InvoiceSherpa user who sends at least one invoice reminder per month collects as much as 10x more revenue than peers who do not.
On your bottom line, sending at least one reminder per month spells the difference between collecting an average of $22,000 per month in past due receivables versus less than $2,500 per month for firms who do not send any past due follow ups. It’s a striking difference, and that’s the reason InvoiceSherpa exists.
#5 - Just Be Direct
When all else fails sometimes you just need to get on the phone and give them a call.
The best way to change this situation is to touch base over the phone. It's easy to delete an e-mail or ignore automated systems, but a real person is hard to say no to.
This is likely the most uncomfortable option of the ten, but the most likely to produce an immediate response from your client.
#6 - Accept Different Forms of Payment
Be flexible for your clients.
Offering online payments on a variety of different platforms ensures that every customer can easily pay their invoice with no excuses. Remember, the easier it is for them to pay, the faster they’re probably going to pay!
Nowadays, it’s easy to offer almost every type of payment out there- from PayPal to bank transfers. Whatever your clients need- be sure to provide it to them.
#7 - Automate, Automate, Automate
Automated invoicing can save you hours and hours of manual busy work. Not only that, but it will help you stay organized and never miss sending out an invoice or an invoice reminder.
By automating your invoicing, you are able to use invoice templates, automatically send reminders, and automatically send thank you and confirmations emails.
It ensures that everyone stays on the same page without causing you hours of work.
#8 - Reward Early Payment
Pick out an incentive or a reward for customers who choose to pay their invoices before they’re due.
This will ensure that clients not only pay on time- they will probably want to pay you before their invoices are due!
Rewarding early payment is also a great way to improve your customer relationships.
#9 - Be Accurate and Understandable
Make sure that your invoices aren’t confusing or convoluted.
Questions going back and forth form you and your client will do nothing but slow the payment process down. Use industry standard formats and ensure that everything on your invoices is perfectly clear to the reader.
If everything is properly explained to your client in the first place, it will avoid them having to come back and consult you about charges
#10 - Establish Real Penalties
Make sure that your clients understand that non-payment is not an option, and late payments are penalized!
Set up realistic penalties for customers who pay their invoices late, to go along with the early payment rewards. Together, these incentives will ensure that customers really don’t want to pay their invoices late.
However, no matter what kind of penalty you put into place, remember to always be nice to your clients. Most of the time, late payments are not done out of avoidance but out of simple disorganization or oversight.
Don’t take a defensive stance with your clients automatically, just ensure that there are policies in place to protect your business from non-payment.
There are clearly many ways to ensure that your invoices are getting paid on time, so why not use them? Being organized and timely is beneficial not only for you, but also for your customers! Contact us to take your first step in getting all your invoices paid on time!