Small businesses rely on prompt get your invoices paid to meet expenses and maintain a consistent cash flow. If your business depends on invoicing, you’re probably all too acquainted with late payments.
When it comes to running a business, late invoices may seem inevitable, but they don’t have to be. You can take practical steps to encourage your customers to pay their invoices on time because fast payment can help enhance your company’s financial health and simplify your accounting process.
To guarantee that your customers pay their bills on time, send out invoices as soon as a job is completed, give convenient payment methods, and follow up as soon as the invoice is past the due date.
How To Get Your Customers to Make Invoice Payments Promptly
Although you cannot force your clients and customers to pay you, you can encourage early payment by paying attention to these suggestions:
- Send invoices online
If you are still sending paper invoices, you should switch to electronic ones. Online invoice delivery is not only quick but also accessible, economical, and efficient. You can save time and money by eliminating the need to print invoices, place them in an envelope, and wait for the mailman.
By using online invoices, you can ensure that your clients receive their bills on time, resulting in quicker payments. You won’t have to be concerned about your invoice being misdirected or your customers missing them in their huge pile of mail. Additionally, many invoicing application systems provide invoice tracking, allowing you to track exactly when your clients receive and view invoices online.
Time is money, as the majority of small business owners are aware. However, money is still money, and you may save both with e-invoices. Even though you might have to pay a charge to use an invoicing or accounting program, you’ll save money on stamps, ink, and envelopes, and you can use your extra time to focus on other elements of your company.
Utilizing invoice software also makes it simple for you to receive payments online. You must make it easier for customers to pay you more quickly, and you can speed up the entire procedure using a payment processor.
- Select a clear invoice template
Most invoicing programs provide a variety of template choices. You should pick a simple, appealing, and easy-to-use template; that includes selecting fonts that are simple to read. Avoid using fonts that give your invoice an outdated or cluttered appearance. Even though it might seem impossible, using the appropriate invoice template will help you get paid quickly for your invoice.
You need an invoice that is not only simple to comprehend but also shows clearly:
- The invoice total
- The goods or services for which your customer is paying for
- The invoicing deadline
- Contact details and payment information for your firm – add a variety of payment methods so that your consumers may select the one that is most convenient for them. That means you’ll get paid sooner.
- The terms and conditions of the invoice
Clarifying and emphasizing your payment information makes it simple for your consumers to understand when and how to pay you, which expedites the process of receiving payment for your services or goods.
- Request deposits
Requesting a deposit or prepayment for a project before you begin is one of the simplest ways to ensure quick payment. This “insurance” is especially useful for longer-term initiatives that may take months to finish. Having a deposit paid beforehand ensures that you have some income to pay the costs of completing the project, such as acquiring materials or applications, and will help you maintain a steady cash flow to meet other business needs.
- Keep an eye on the due date of your invoice.
Choosing an invoice with a specific due date is good, but you should also make sure you choose the right date. An invoice that specifies “due upon receipt,” for instance, is an example of what to avoid doing because it doesn’t specify a specific due date and hence encourages late payments.
You may also come across the phrase “Net 30,” meaning the invoice must be paid thirty days after it is sent to the customer. Some customers, nevertheless, might not be familiar with this jargon. The due date you select should be precise and clear. For example, if the invoice is due 20 days after you send it and you sent it on January 1st, simply enter January 20th as the due date. As a result, your clients will have a precise due date, increasing the likelihood of getting paid on time. Also, if you want your customers to make invoice payments on time, try bumping forward the due date. For example, if you regularly send invoices that are due 20 days after your customer receives them, try moving the due date up to 10 days after the invoice you send. You’ll have less time to wait this way.
- Allow automatic payments
Allowing automatic payments for your invoices is a terrific method to collect payments faster and know when you’ll receive payments from your clients. Automatic payments allow clients to charge the amount they owe you directly to their credit or debit cards on the same day of each month, eliminating the need for them to lift a finger to pay you.
This simplifies the payment procedure for you and your clients and alleviates the concern of not knowing when you’ll receive money. This recommendation, however, would rely on the type of business you run and your clientele. If you run a subscription-based business, this could be a terrific alternative to explore to aid with payment processing.
- Discounts for early payments
Offering early payment discounts is an excellent way to encourage your clients to pay their invoices on time. Consider providing a 5 percent or 10 percent discount to clients who make their payments within the first fifteen days. This strategy is a fantastic concept because everyone likes to save money, and consumers who want to save money will take advantage of this offer and make their payments on time. Even though you may lose a little portion of your transaction, you will receive your cash sooner, which may be worth it. However, this solution might not be suitable for all sorts of organizations. Still, it is worth exploring if your company is experiencing cash flow problems due to customers making late payments for the invoices sent to them.
- Set clear payment terms
Ensure that you explicitly discuss your payment terms and conditions with your customers and incorporate the details into your invoice. Your clients will know the payment deadlines and penalties for late payments. If you inform your clients of all of this data before signing a contract or discussing a project, there will be no uncertainty regarding your payment conditions later on when the invoice is due.
- Consider late payment fees.
It’s important to remember that, even if you don’t want to, you could have to undertake drastic actions to get your money and maintain your company’s cash flow. If providing incentives for early payment is unsuccessful, you might want to suggest late payment penalties or interest. To minimize confusion, if you choose to impose late fees, note them in the terms and conditions of your invoice. Additionally, let them know that if you don’t receive payments by the due date, you’ll start to add interest or fees.
- Send out invoices immediately.
Customers won’t be able to pay you if they don’t receive an invoice. Keeping an eye on your billing is therefore essential. You’ll get paid faster if you send invoices to clients right away. Receiving an invoice immediately after a transaction increases the likelihood that the customer will pay for the goods and services.
Several invoicing software choices are available to assist you in automating your invoicing process, but you risk quickly becoming overburdened and falling behind on sending out bills. Additionally, most invoicing programs let you send recurring invoices to regular clients.
- Remind customers to pay invoices.
Another strategy to prevent late payments is regularly sending reminders about invoice payments. Customers who may have forgotten to pay you may need a friendly reminder. A few days before the due date, on the appointed day, and a few days after the due date are good times to send an invoice payment reminder.
Continue phoning the customer and sending email reminders if the first one isn’t effectively nudging your client in the right direction. Although following up with late payers might be annoying and annoying, it is your responsibility to do so.
The ability to automatically produce invoice payment reminders, which saves you a ton of time, is another benefit of invoicing software. Nearly all of these applications come with an account payable report that lets you view your customers’ unpaid amounts without manually keeping track of who hasn’t paid yet.
- Be polite
You must always be pleasant when delivering invoices or following up with clients after the payment’s due date. Being calm and respectful with clients when their payments are late will help you retain a strong connection and avoid sabotaging prospects with the customer. To express gratitude and make an excellent impression, always include a “please” and “thank you” on the invoice and associated email.
- Send invoices in stages.
If your business is project-based, you might want to consider issuing invoices in phases. Try billing after you finish a specific project activity rather than sending out one large invoice at the end of the assignment. That way, you don’t have to wait until the end of the project to receive your payment.
- Offer more payment methods.
Depending on your business type and activities, provide your consumers with numerous payment options. In addition to accepting standard payment methods such as credit cards and cash, consider accepting new payment methods such as online and mobile payments to diversify your payment options. Offering your clients payment option flexibility can make the entire process smoother and faster for them, allowing you to get payments sooner.
How to Streamline Your Billing Process
You must use invoicing software to track your invoice payments on time. With the help of this software, you can automate the billing process, send invoices out fast, and encourage clients to make prompt payments online. Experts strongly advise small firms to use invoicing software or to buy dependable accounting software if they wish to send online invoices and keep the books balanced.
The following is a list of the benefits of using billing software in your company:
- To send bills to customers via the internet.
- Accepting online invoice payments from customers.
- To automate your billing procedure.
- To determine when customers received and read their bills.
- To deliver automated reminders to clients who have not paid their invoices on time.
- To create the standard terms and conditions that show on your invoice.
- To provide helpful information such as accounts receivable and sales by client.
Best Invoicing Software for Small Businesses
Invoicing software can help you automate making and sending invoices to your clients early, leading to prompt payments. Here are some great examples of invoicing software you can use for your business:
- Square Invoices is the best product-based business software accessible.
- Zoho Invoice is one of the top invoicing software options for small businesses.
- Bill.com is a fantastic invoicing program that also includes bill management.
- Invoice2go is an excellent app for preparing and sending invoices via mobile devices.
- Invoice Ninja is ideal for small businesses looking to save money by using free software.
- Harvest is ideal for small businesses that wish to manage time, projects, and invoicing in a single location.
Choosing the best invoicing software may appear complicated, but you must consider your business requirements, budget, and the functionality required to suit your company’s needs. Take all of these factors into account, and you’ll be able to select the best software for your company.
What If Your Customers Still Don’t Pay Their Invoices on Time?
You now have thirteen ideas to promote fast payment in your company so that you won’t feel helpless in the case of late invoice payments. Take action against clients who make late payments by using these tips to get invoice payments on schedule.
But what if your clients still don’t pay their bills on time even after considering these recommendations? Invoicing finance is one of the best options for handling situations like this, among your many other options. Invoice finance can be the best option if your cash flow is inconsistent or insufficient due to slow-paying consumers. You can use your outstanding invoices as collateral for a line of credit with invoicing finance or sell to a factoring company for immediate cash.
How Much Can You Charge for Late Fees on Unpaid Invoices?
As a small business owner, you may consider charging your clients a late fee to help you get paid faster. A late fee policy on your invoices can encourage your clients to pay their bills on time to avoid a late fee charge. However, make sure that the terms and conditions of your policy are clearly stated on every invoice you issue. If you run a project-based firm, address late payment penalties with your clients before beginning the job.
The sum you can impose for late payment fees is regulated by your state, as the state determines the amount of interest a business can charge. However, small firms commonly charge roughly 1.5 percent interest each month, which should not violate your state’s usury rules. You may look up the maximum amount of interest allowed in your state on the internet.
Conclusion
Your firm must have a regular cash flow to be scalable, which may be tough with slow-paying clients. However, you may encourage your clients to pay on time by offering incentives for early invoice payments, imposing late fees, sending invoices online, and automating your invoice payments. You might also consider adopting invoicing software, which allows you to track when your clients receive and open their bills, send automatic reminders to slow-paying customers, and automate the invoicing process. Invoicing software will enable you to remain on top of your invoicing and send out invoices more quickly, increasing the likelihood of obtaining prompt payment.
