While collecting payment from customers isn’t something most business owners relish, it is however, a necessity, and timely payments on invoices can help businesses maintain a healthy cashflow.
If you’re finding yourself forced to chase up on payments each and every month, the following six tips could help you encourage your customers to pay on time:
- Give customers quotes or engagement letters
Before commencing a project with a customer, it might be worth formulating a letter of engagement to send them, or a quote, clearly stating the terms of payment.
When it’s time to send out an invoice, try including a reference to the letter of engagement or quote you had previously sent them, as this may serve to jog their memory, and encourage them to pay you in a more timely manner.
As well as serving as a reminder, quotes and letters of engagement can also clarify the bill and any overages.
- Send out invoices promptly
The sooner you send the bill to your customer, the sooner they will give you the payment, so whenever it comes to invoicing, don’t delay on issuing invoices under any circumstances. Doing so also helps show that if you can be punctual, so can they.
As soon as a project is finished, or on the same date every month, be sure to send out an accurate invoice to give yourself the highest chance of being paid in full, and on time.
- Offer multiple methods of payment
In some instances, the payment itself is not the issue, and instead, your clients may be struggling with the method of payment available to them. by offering your clients a range of payment options, and listing them on each invoice you send out, you give them more opportunities to pay in a way that’s most convenient to them.
- Be clear on invoice expectations
By clarifying what your expectations are from the get-go, you can satisfy your customers invoicing needs, and set yourself up for receiving timely payments. For example, do they need the invoice to be addressed to a certain person, or perhaps the hours work or employee ID numbers should be included. By establishing this early on, you can ensure that you’re not the reason for any late payments.
- Send invoices to the right recipient
The problem of an invoice not being paid because it wasn’t sent to the right recipient, is so easy to avoid, but so frustrating when it happens. Check and double check that you’re sending your invoices to the correct person, and where possible, try to establish and maintain a customer-centric approach.
- Use a progress or retainer-based model
Retainer invoice models give you cash in your hand before a project even commences, with an upfront payment to guarantee that the client will honor their side of the agreement, which can be an effective alternative to sending invoices out when a project is completed. This invoicing model also gives you the chance to carry out regular, recurring billing.
Progress invoice models on the other hand, enable you to schedule payments as and when certain milestones within the project are completed, or once a specific date has been reached. This model stops you from carrying out a lot of work without receiving any payment.
However, while these models can be extremely effective for both parties, it’s imperative that the terms be laid out clearly in the written agreement.
If you’ve tried the above methods and are still struggling to get paid on time, it might be a good idea to have an accounting professional scrutinize your processes and come up with an effective means of resolving the problem.