According to a recent report by Sage, 1 in 10 invoices are paid late. The report further finds that these late invoices are costing small and medium enterprises (SMEs) about three trillion dollars, globally. That seems like a huge number (it is), but for context, it’s the result of 10% of invoices being paid late. SME owners understand the impact of late payments on their business – it’s money that could have been invested, money that might be written off as bad debt, money that they require and are owed. You need to get paid faster – here’s how:
One of the best ways to get paid faster is to ask for money sooner. Back in the day, invoices were paid through the mail by paper cheque; thankfully, that dark age is over. Those times called for invoices to be paid within 30 days – plenty of time for someone to write and post the cheque, even accounting for postal delays. Today, almost all invoicing is done electronically so there’s no need to give your clients a 30 day window – narrow it down to seven days instead.
On the subject of electronic invoicing, you should have a dedicated invoicing program that can handle monitoring payments for you. The program should send the invoices, accept payments, and alert you if a payment has fallen behind – better yet if it automatically reminds your client to pay. The report by Sage indicated that a lot of business owners are worried that following up with clients could negatively impact their relationship with those clients. That’s a hurdle that’s important to get over – you are owed the money. When maintaining a relationship with a client means ignoring late payments or not getting paid, that client might not be worth the relationship.
The sooner your invoice gets seen, the sooner you can get paid. Send your clients their invoices as soon as the work is done – you’ll get paid faster!
You can employ a carrot-stick philosophy if you’re having a hard time getting people to pay you. Offer a discount for prompt payment of the invoice – that discount can be small and the value you get from being paid on time will probably be worth more than the discount. The flipside is applying penalties for late invoices so it becomes more expensive for your clients not to pay you.
Another method of ensuring payment is using a multiple invoice system for any project you’re working on. Once a set amount of work is done, invoice the client – if they don’t pay, work halts until you get the rest of your money. This solution can be a bit messy depending on how ready you are to handle multiple invoices, but it can be a practical solution for projects with numerous steps.
Following all of this advice should help you get your invoices paid on time. Another way you can expedite getting paid is to get efficient accounting services. At Compass Accounting, our accounting team will help you find the best invoicing software and give you tips, specific to your business, about how best to get paid quickly.