Not getting paid on time? You’re not alone. Nearly half of B2B small business owners – 48.8 percent, to be exact – are struggling to get paid on time. And while the occasional late invoice may not have a dire impact on your financial health, numerous or frequent late payments can be disastrous. Without a reliable cash flow, business owners quickly run into operational setbacks, including the inability to pay vendors and suppliers, their employees, and in many cases, themselves.
Though it may not be possible to avoid late payments altogether, there are a few things that business owners can do to guard themselves against this type of behavior and increase the speed and frequency of which they get paid.
1. Set clear expectations
One of the first ways to avoid late payments is to set clear expectations from the very beginning, well before that first invoice goes out. It’s likely that, just like you, your clients have more than one bill to worry about and that doesn’t leave much room for confusing or vague payment terms.
New clients shouldn’t have to wait until the first due date to understand how the billing cycle works or, in most cases, approximately how much that bill will be. By providing those two pieces of information early on, customers can include your bill in their financial planning efforts from the very start.
2. Set reminders and follow-ups
People forget things. Maybe it’s the first payment and they simply forgot to schedule, maybe someone in accounting dropped the ball, or maybe business is more chaotic than usual and that invoice in need of payment got lost in a sea of tasks and to-dos.
Whatever the reason, a soft yet mindful nudge can make it less likely that your invoice falls through the cracks and remains unpaid. The same is true for invoices that are past due.
One of the best ways to handle reminders and follow-ups is to have a protocol in place, one that governs when you send out a reminder and how soon you follow up with unpaid invoices. Often, reminders depend exclusively on your billing cycle (biweekly, monthly, quarterly, etc.); however, most businesses follow-up within a week of non-payment.
3. Use more than one form of communication
Important emails get sent to spam, every now and then something gets lost in the mail, and sometimes an employee leaves and alternative lines of communication aren’t established. There are several reasons why your invoice may have been inadvertently missed, but communication shouldn’t be one of them. If you send you invoiced by mail and a few have yet to be paid, considering calling the client instead of sending a follow-up email. The same is true of you typically mail your invoices, which may merit a follow-up email or a call.
4. Reward early payment
Being paid on time is great, but being paid early can help you keep your cash flow moving and provide a small buffer in the case of late invoices. It’s unlikely that you have a slew of clients racing to pay their invoices before the due date, but you may be able to entice some by offering some sort of reward for doing so. Small discounts (5 – 10 percent), a service upgrade, or even a free product or swag can help convince clients to pay ahead of time.
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5. Penalize for late payments
Late payments can cost business owners money, and in some cases, the answer may be to pass on some of that cost to your clients. A late fee may make it more likely that clients prioritize payment of your bill. However, there are a few things to keep in mind. If you are going to charge a late fee, it should be something your client is aware of early on. Similarly, if you are changing your payment policy, the addition of a late fee must be well communicated, preferably at least a full month in advance.
6. Build strong relationships
Building a strong relationship can be beneficial for any type of business engagement, but when it comes to payment, a strong relationship may positively impact the level of accountability that a client feels, particularly when it comes to billing – they won’t want to disappoint or risk ruining an otherwise strong partnership.
7. Be polite
You may be tempted to demand payment ASAP, but it may be better if you say please. It may not seem like a big deal, but if you simply send over a basic payment template, free of any additional verbiage, you may leave your client feeling like they’re nothing more than a paycheck. Taking the time to add some thoughtful yet minor touches to your invoice – phrases like “please let me know if you have any questions,” and “I look forward to working with you again” can change the tone of your invoice and therefore the respect a client has for you and your money.
8. Offer more than one payment method
While there are plenty of businesses that still send hard copies of invoices or pay with checks, many more depend on the payment processes made possible by the digital age. At the very least, your business should be set up to accept payment via check or digitally through a payment processor such as Square, Paypal. Bill.com, or any of the other options available on today’s market.
9. Stay on schedule
It may be tempting to put payroll off for a day or two or cling to a loose schedule, but one of the best ways to get paid on time is to be predictable. Whether it be the first Monday of the month or the fifteenth of every of every month, your clients should know when exactly their payment is due. This helps them plan, but it also helps increase the professional expectations. Payment expectations that change all the time can quickly, though unintentionally, set a lackadaisical precedent. They can also make it hard for you to control your cash flow.
10. Offer and incentivize reoccurring billing
You know what takes the guesswork out of getting paid? Getting paid automatically. By giving clients the opportunity to pay automatically, you intrinsically free up time and money while guaranteeing payment, barring any unusual circumstances. Of course, some clients may be hesitant to do so, but a little incentive, like a small discount, could sweeten the deal and help you see a consistent flow of revenue from month to month.
You take pride in your work, and you should be compensated as such. Even the most consciences clients may miss a payment here and there, but your business shouldn’t suffer at the hands of multiple late payments. If you’re cash flow is slowing because of unpaid invoices, consider using one or more of these ten tips to help get your finances back on track.
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