Research by pay.uk (which runs the Bacs Direct Credit and Direct Debit payment services) shows that UK SMEs are paying a total of £4.4 billion a year to collect money they are owed from late invoices, with 22% of those spending more than £500 a month chasing payments.
In this article we are going to share 8 top tips for getting your invoices paid on time which will help with your cash flow and reduce costs to your business.
- Send invoices to your client as soon as possible
Why delay the process yourself? The quicker you send the invoice to your client, the sooner that they are likely to pay. It also means that the product or service that you have provided for them is fresher in their mind which should help to speed up the process.
Also, if you take a few weeks to send an invoice to your client, you are sending them a message that you are not in a rush for the payment.
- Agree clear payment terms up front
Don’t wait until you send the invoice to outline when you expect to be paid, because this might surprise your client and cause delays. Let them know the payment terms in advance before you start the work or provide them with a product. This should be in writing in the form of a quote or contract and ask them to confirm that they are happy with these terms before proceeding.
- Send the invoice to the right person
Do you know who is responsible for paying the invoice because it might be different to the person you have been liaising with. It’s worth asking the question in advance and getting the name, email address and phone number of the person or department that pays the bills so you can send them the invoice directly. This saves it being sat idle in someone’s inbox for days or weeks before they forward it on to the right place.
- Make the payment process easy
Make it as easy as possible for your client to pay the invoice by ensuring it well presented, includes your bank details and possibly having multiple ways to pay. This could include taking credit card payments, PayPal or even offering instalment plans.
- Penalties for late payments
Charging interest for late payments is a legal entitlement for all businesses in the UK. You don’t necessarily have to enforce this, but if you include it in your payment terms it can be a powerful tool for encouraging your clients to pay on time. If you’d like to find out more about how to do this, we have written an article with more details which you can find here:
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- Offer a discount for early payments
Financial incentives can be a powerful tool, as discussed in the previous tip, but this time we are using a ‘carrot’ rather than a ‘stick’ which can come across as much more warm and friendly. Even just a small discount of 5% to pay within 7 days can really encourage your client to get the payment made quickly.
- Synchronise with payment runs
Many larger businesses will have a certain day of the month that they pay their invoices. If you don’t know when this occurs and you miss it by a couple of days, then it could be a few weeks before you get paid. Why not ask your client when they make their monthly payments so you know when is the best time is to submit your invoice.
- Send a reminder
Sometimes your client might have just forgotten to make the payment, so a simple email reminder a few days before it is due will be enough to prompt them. But make sure that the email you send it polite and professional.
We hope that these tips have been useful for you however there may still be occasions when you need extra help collecting late payments. At Positive Collections we have a strong history and proven track record of recovering monies using professional, legal and ethical approaches and always strive to reach a fair outcome for all parties. If you’d like to find out more, please get in touch and speak to one of our friendly and professional experts.