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15 Invoicing Tips to Encourage On-time Payment

May 9th, 2017

australiandebtsolvers - 15 Invoicing Tips to Encourage On-time Payment

You’ve delivered the product and sent the invoice, and now the client’s delaying payment. Late paying clients create cash flow problems and disrupt your business. Left unmanaged, non-payment can tip you towards insolvency in serious cases.

If you want to minimise overdue invoices without alienating clients, start by implementing these smart invoicing strategies.

1. Ask politely

When it comes to getting paid on time, polite language matters. Research shows polite requests such as “thank you for your business” or “please pay your invoice within” can boost payment rates by more than 5%.

Politeness costs you nothing and can enhance your business’s brand, so let your customers know you appreciate their business when requesting payment.

2. Offer multiple payment methods

Make it easy for your customers to pay. Customers will have their preferred payment methods, and familiar methods motivate them to pay on time. Whether it’s EFT, cash, direct debit, PayPal, credit card, or old-fashioned cheques, expand the range of accepted methods to accommodate your clients.

If you don’t know your customer’s preferred payment methods, ask. Add an invitation for feedback at the end of your invoice so you can gather preferences on payment options.

3. Use cloud-based accounting to streamline invoicing

Cloud accounting services make it easy to track sales and generate invoices. For small businesses without a dedicated accounts department, cloud accounting streamlines the invoicing process. It’s also an easy way to check who’s paid and whose invoices are outstanding.

4. Invoice through a digital client portal

Provide clients with a digital client portal so they can log in at any time and check their invoices. If you use a cloud-based accounting service, your provider might offer client-portal features. Digital client portals can send automatic payment reminders, and some allow clients to save their payment details so they don’t have to re-enter them every time.

Using a digital client portal automates the invoicing and reminder process to save you time. It’s a way to empower your clients with self-service and eliminates any excuses about non-payment because invoices weren’t received.

5. Offer discounts for early payment

Some businesses offer discounts for early payment. If you’re considering this option, ensure your pricing structure is able to accommodate the 1%, 5%, or 10% offered to clients who pay early. Remember, if your margins are already tight, this might be a costly option. Make sure benefits of early payments compensate for the discounts, or it could end up costing you more.

6. Send invoices to the right person

Organisations aren’t always proactive about invoice attribution with their vendors and the department you’re selling to might not be the one paying the bills. Identify the correct person for sending invoices. If your invoice has to be rerouted to be paid, this creates additional delays and raises the risk of lost invoices.

7. Provide all the information they need to pay

Ask new customers what information they need to make payment, and include the information on every invoice. If they need a different name and address on invoices, make sure you provide the details on every invoice. Don’t take it for granted the same person will process payments every time.

8. Cut out ambiguous terms

Eliminate ambiguous terms and use everyday language. Rather than technical business terms like “net 30,” include a specific date to avoid confusion. Don’t say the invoice is “due upon receipt” as this can create ambiguity. Instead, give a fixed timeframe such as 21 days; research shows this can be more effective and helps you get paid faster.

9. Include late payment interest terms on your invoices

Include any late payment interest terms on your invoices if you have these outlined in your contract. Customers can be motivated to pay if they have to pay an extra 1% every day the payment is overdue. Check regulations to make sure your interest terms are legal and not onerous.

10. Establish expectations

Customers don’t like surprises, so be transparent and set your payment expectations from the start. Outline these in your sales contract and on your website. Expectations allow customers to plan ahead and meet their payment obligations.

11. Follow a schedule

Bill consistently on a fixed cycle to establish expectations. Consider invoicing more often to shorten the payment cycle if necessary. Send invoices immediately; the sooner your customers are billed, the sooner they can make payment. Use automated recurring billing wherever possible.

12. Refer to your terms of trade

Include a succinct reference to the terms of trade in your contract or on your website. You can mention penalties for late payment such as how collection costs will be applied to escalated invoices. If it’s legal to do so, you might also mention refusing warranties and replacements if invoices aren’t paid on time.

13. Escalate payment reminders

Set out a policy for escalating payment reminders so every outstanding account is treated the same way. This can be automated in your invoicing platform, or your staff can send out reminder texts or letters as necessary. Regular, one-on-one contact is a powerful way to get customers to pay. However, if letters and phone calls don’t work, you’ll want to escalate it to a collections agency without delay.

14. Identify high-risk clients

If your business provides major projects on a post-paid basis, screen your clients. You can formalise the process by having new clients fill out new client application forms. Having information about clients before agreeing to supply lets you make an informed decision. You can refuse to sell if your client has a poor credit history.

15. Ask new customers to pay a deposit

Businesses with doubts about new customers can mitigate non-payment risk by asking for deposits. Require a 40-50% deposit before you start work or deliver the goods. A variation on this is to charge a smaller deposit and require milestone payments. Your cash flow will improve and the non-payment risk is reduced.

Slow-to-pay customers can be a huge headache for your business, disrupting your cash flow and constraining growth. Invoicing correctly and regular reminders can be effective most of the time, but you should have a process for escalating outstanding accounts. Proactively managing your invoices sets up your business for healthy cash flow and operations.

Australian Debt Solvers is a leader in assisting Australian businesses with insolvency and administration services. If you need expert advice on your business challenges, contact us today for an obligation-free discussion.

If Your Business Finances Are Out Of Control, We Can Help.
Call us on 1300 905 107 or Click Here For More Information.

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David Hill
David has over 15 years in the insolvency industry – advising clients through restructuring of their business. His clear, “straight up” style provides clients with a strong direction of what they need to do, and how the process will work. As importantly, he brings empathy to the process – which is essential at a “high-stress” time for clients.

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