Get paid faster using smarter invoicing

Most small businesses recognise the financial difficulty of having clients who are slow paying their invoices. Understandably most also believe the power to change this is in the hands of the customer. It is an easy assumption to make; after all they are the ones making the payment. But, making a few small changes to your invoicing processes can make an enormous difference. Smarter invoicing is within your control if you follow the simple steps below:

Know your customers

Get to know who you are dealing with. You should be aware if you are putting your business at risk before you sign up a new customer. Conduct a credit check to get an overview of their credit and payment history in order to determine if the customer has the ability to pay. Get all the information before extending credit so you know that you can make an informed decision.

Dun & Bradstreet can provide credit reports on business owners and firms. Visit www.dnb.com.au for more information.

Give customers what they need

Ask new customers what they would require from you to avoid delays. The customer may ask you to include a number of things on your invoices such as a purchase order number, a detailed breakdown of charges or your ACN. Also determine your customers' preferred way to receive invoices. Certain customers may prefer emailed invoices rather than mailed or faxed.

Providing customers with a number of ways to pay is also useful in speeding up payment. If customers are forced to use a payment method they are unfamiliar with, payment will be delayed. There are many methods of payment (cash, direct deposit, cheque, credit card etc) and by offering the choice your customers will find it easier to pay.  

Invoice faster

The faster you send the invoice the quicker it can be paid. It is easy to get sidetracked by other tasks but setting aside time for invoicing will mean better cash flow for your business. Aim to send an invoice as soon as the goods are delivered or you have completed the work. The last thing you want is to miss the payment cycle by a day or two which could delay payment by a month or more.

Using an electronic invoicing and payment system could assist you in this area. Just be sure to investigate the services available and ensure they are compatible with your current invoicing software.

State your terms

It seems simple enough, but not stating your payment terms up front allows your customer to establish their own rules. Whatever your preferred payment terms are, state them on the invoice. Also be clear and mark the due date on the invoice so your customers know exactly when you expect payment. If you don't state you terms on the invoice, how can you expect your customers to abide by them?

Don't think you are going overboard if you print both the payment terms and due date on the invoice. It is safer to state the obvious than be ambiguous about your requirements.

Keep a paper trail

Be diligent in keeping records. Have a system to document when you sent the invoice and the due date in case you need to follow up. The last thing you want is to be caught unaware of when the invoice is due or when you sent it. Also make note of when the payment is received. An electronic invoicing and payment system may be beneficial in keeping your records up to date.

Similarly, be sure to document all communications you make with your customers regarding invoices or payments. It is important to keep records should there ever be a dispute over an invoice. It can be extremely embarrassing to be on the phone to the customer uninformed they spoke to another team member the day before.

Follow-up payment

Don't let an overdue invoice go without following up with the customer. When an invoice is past its due date, give the customer a call. This serves two purposes - firstly, you are letting the customer know that you are on top of your invoices and secondly, it is a personal request for payment. Agree on a payment amount and date before you end the call.

Often, an overdue invoice is simply a misunderstanding or genuine mistake so don't approach the call aggressively. Assuming good intentions will lead to a good relationship in the future.  

Do you have a customer that is being particularly tight fisted? Find out how to tackle the issue by reading collecting overdue debt >>

Use these strategies to do your part to make sure you get paid on time, every time.

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