Tips and Tricks to Speed up Invoice Payments
June 12th, 2021. 4 min read
Small businesses and freelancers rely on the quick payment of their invoices to cover expenses and maintaining a more reliable cash flow. Quick payments support your company’s financial health and streamline accounting processes. This article will provide tips for encouraging customers to pay their invoices in due time.
- Create Clear and Simple Invoices
Complexity and ambiguity could scare people away, and that’s why poorly designed invoices are a significant cause for delayed payments. Unclear invoices with inadequate information will confuse your customers; therefore, your invoices should be as clear and straightforward as possible. Invoices with Make important information, such as the total amount and due date, stand out in your invoices so that your clients can make payment with ease of mind.
- Split Payment into Several Transactions
To ensure getting paid for your work in due time, request a deposit or break down the total payment into several installments to be delivered on a schedule. Payment by installments become more practical for more significant, long-term projects that could take a while to complete.
- Invoice Immediately
If you send out your invoices right away,
1st. They will be due sooner, so you can collect payments earlier.
2nd. Your customers will pay more readily because the projects are still fresh in their minds.
3rd. You can compose invoices more efficiently and accurately, avoiding forgetting the details, which can lead to misunderstanding and delayed payments.
- Clarify your Payment Terms Up Front
Discuss your payment terms before closing a deal with a customer and summarize details of those terms in your invoices. Your customer will know precisely when their invoice is due and what fines will apply if they fail to make their payments in time. Expressing important details will minimize confusion and misunderstandings about payment terms. The best time to agree on clear terms is while negotiating a project and signing the contract.
- Diversify Payment Methods
To get paid quicker, accelerate the entire payment process, and make it easier for your customers. Give them as many ways to submit payment as possible. To diversify your payment options, consider accepting online or mobile payments in addition to more flexible payment methods like cash and credit card.
- Consider Automatic Payments
A great way to receive timely payments from your customers is to allow automatic payments at fixed intervals for your invoices. In doing so, you’ll know when exactly you’ll get paid by your customers.
- Offer Incentives
To encourage your customers to develop a habit of paying bills in due time, offer discounts or other rewards for early payments, like reducing the total invoice amount by 2% if the invoice is paid in ten days from the invoice date. 2% might not save your customers big money, yet it will appear as a gesture of appreciation for prompt payment.
- Charge Late Fees
“Carrot and Stick” policy combines reward and punishment to derive the desired behavior. While incentives function as the carrot, late fees are the stick: incentives reward reasonable early payments and late fees penalize past due invoices. You should charge late fees on your unpaid invoices to prevent customers from missing deadlines. Rewards and fines had better be expressly defined to avoid misunderstandings.
- Follow up on Late Payments
When a customer’s invoice is past due, you should immediately follow up on them. You need to run after late payments to ensure your invoices get paid. In your CRM software, schedule brief reminder emails for the day invoices becomes past due and reminding them of the payment methods they have accepted. Continue to schedule reminders at regular intervals, both by email and phone, until your payment is secured.
P.S. The amount you are allowed to charge in late fees will depend on your business location (province/state). The maximum annual amount of interest a business can charge is set by the respective authorities. Small companies can charge about 1.5 percent interest per month, and this shouldn’t breach your state’s usury laws. You can check the maximum amount of interest allowed in your state online.