Small businesses are owed on average £6,142 mostly by firms not paying for goods and services on time, according to the Federation of Small Businesses (FSB).
Cash flow is one of the biggest issues for businesses. Being paid often 30 to 60 days or even longer after you have actually done the work can make it very difficult for business owners.
1. Communicate your payment terms
Clearly set out, the payment terms from the start. That way your customers are informed and are aware of your payment terms. Payment terms are often included in an organisation’s terms of business. However, it is also helpful if it is displayed on the actual invoice itself and on statements.
Consider rewarding customers if they settle your invoice by a certain date, known as an early settlement discount. A small discount such between 1 or 2% will be deducted from the amount payable. You could also charge interest for late payment of your invoices.
2. Invoice on time
You should ensure that you raise your invoices and deliver these to your customer as soon as you have completed your work. If you delay sending out invoices, it could result in them falling into the following week or next month’s payment run. Setting up an automated or online invoicing process will ensure all invoices go out on time.
3. Get the details right
Confirm that the details on the company invoices are correct. When invoicing a new customer, ensure that you confirm the correct contact details.
Find out to whom the invoice should be sent. Failure to get the invoice details correct could lead to the invoice being rejected by your customer. contact person to send the invoice to.
4. Send out regular reminders
Many accounting systems and CRM systems will allow automatic reminders to be emailed to clients informing them that an invoice is falling due shortly. This will act as a reminder that an invoice payment needs to be made to you.
Monthly statements should be sent to customers showing the balance outstanding and how many days overdue any invoices are.
5. Offer alternative payment types
When you make it easy for customers to settle your invoices, you also improve the opportunity for payment. Offer as many payment options as possible.
If you do not have a credit card machine, you can make use of alternatives. PayPal and Stripe will allow customers to make card payments to you.
Invoices generated from most accounting packages will allow you to include a clickable link to make a payment on the invoice. This makes it easier for customers to settle invoices.