6 Tips For Faster Invoice Payments

6 Tips For Faster Invoice Payments

Are you tired of receiving invoice payments way over their due dates? Find out how you can streamline your invoicing process for faster payments.

Whenever a business provides a product or service to a customer, they usually share an invoice with the payment terms—a document that indicates the total price the customer must pay. For example, a roofing contractor may send an invoice indicating that the customer is due to pay USD$5,000 upon the completion of a roofing replacement job. In some cases, the invoice may also contain an itemized list of what makes up the total price. 

While an invoice is most certainly a binding agreement, there are cases where customers tend to send invoice payments later than expected. When this happens, it can throw off the cash flow of your business, which, in turn, can mess with your accounting and ability to pay suppliers on time. Fortunately, there are several ways to tackle this.

Below are six practical steps that can help you get your invoices paid quicker:

1. Craft a clearer and more accurate invoice

Misunderstandings almost always guarantee failure in most business situations. The same is true when invoicing. If the invoice lacks important details pertaining to the order, there’s a good chance the customer will delay payment. For example, if the payment’s due date is nowhere to be seen in the document, you most definitely can expect delayed or even non-payment. Therefore, the first step to faster invoice payments is to craft a well put together and professional invoice that clearly states how much is due, by when. Business management software like the one developed by Jobber can significantly help with this.

Here’s a list of information that you must include on your invoice:

  • Business name, logo, and address
  • Customer contact details
  • Date issued
  • Invoice title
  • Payment terms
  • Quantity and price of services or goods
  • Total amount to pay
  • Unique invoice number 

The payment terms must be present on the invoice. This part includes the payment’s due date, which may range from days to months or upon receipt, and is typically highlighted. Naturally, you should discuss and agree the payment terms with your client first before you issue the invoice to allow for negotiation if required.  

Speaking of which, when is the best time to send an invoice? The following section should answer that question.

2. Send invoices promptly

There’s really no blaming your clients for your cash flow problems if you were late sending the invoice. But then again, sending it as soon as possible isn’t necessarily the best option. 

So, when is the best time to send the invoice to your client? Here are some pointers that should help you in that regard:

1. Upon purchase: Best for selling goods

If you sell goods, like shoes or appliances, then it’s best if you send an invoice upon purchase. In other words, you should expect payment on the spot. In this case, it’s advisable to offer payment options like credit or debit card, cash, or check.

2. Upon project completion: Best for short-term services

If you provide short-term services, like roofing replacement or pest control, you should send the invoice upon the completion of the project. This ensures no sides will get scammed, as both the vendor and client are most likely still in contact with one another.

3. At pre-determined milestones: Best for large-scale projects

If your business participates in large-scale projects, such as house construction or custom software development, you might want to send invoices at pre-determined milestones.

For example, if you’re constructing a house for a client, you may send invoices every time you complete a part of the house, like the bathroom or the kitchen. This will allow you to obtain the necessary funding to continue the project. It also provides the client more time to settle their budget and not press them to pay at once.

4. Monthly/bi-weekly/weekly: Best for long-term services

If you provide long-term services, like IT support or consulting, the only viable option would be to send the invoice monthly, bi-weekly, or weekly. This is particularly true for agencies that aim to build long-term relationships with their clients.

Before you send your first invoice to a client, make sure they’re aware of your terms and conditions, and when you will be sending them the invoice. If they receive an invoice out of the blue, there’s a good chance they’ll either delay their payment, ignore it or not pay at all.

3. Always follow up on invoices

Oftentimes, businesses fail to follow up on their clients long after the invoice due date. Who knows, the client may have only forgotten about the invoice and has made an honest mistake. For that reason, you should always follow up on your invoices either via phone call or email.

When sending a follow-up email, you should attach the original invoice to help them remember. In the case of a phone call, you may recite the unique invoice number in case they sought the goods or services of different companies.

4. Ask for an upfront deposit

While asking for a deposit before you even start with the project sounds like a bad idea, it’s actually a rather clever strategy, and for several reasons.

1. Minimizes the likelihood of non-payment

There are clients that disappear from sight and cut off all contact with you once they receive your goods or services. That’s why asking for a deposit is a good move since it weeds out clients that can potentially result in a non-payment.

2. Your client becomes more engaged in the job

Since the client has already spent money on the project, they’re more likely to participate as they would naturally want to increase the chance of success for the project.

3. A deposit provides you with working capital

Businesses, especially small ones, tend to engage in a project only to find out they don’t have enough money to sustain the operations. This can lead to serious problems and may even result in the abandonment of a job. With a deposit, however, you can obtain the capital needed to jumpstart the project.

In some cases, asking for an upfront deposit isn’t always a good idea. Ideally, you only want to charge a deposit for new clients, since you should know already the clients that are trustworthy.

So, how much should you charge as a deposit? Typically, when asking for a deposit, it’s best to ask for up to 50% of the total project cost and at least 30%, though you should only go for this lower limit if the client is pushing back.

5. Consider accepting more payment methods

As a vendor, it’s always easy to assume that your client is only paying late due to their lack of integrity. However, in some cases, the main reason for a late invoice payment is the lack of payment options. With that said, consider expanding your payment methods.

Here’s a closer look at the payment options you should be accepting in your business:

  • Cash: Cash is the fastest way to receive payment, but it’s also the most unsecure and perhaps the least convenient method. Still, it’s a viable method for brick-and-mortar businesses.

  • Check: Checks are similar to cash in the way that you require physical contact with your client. However, they’re less cheap and more secure, so it’s also worth adding to your accepted payment options.

  • Credit and debit cards: Customers find credit and debit cards to be one of the most convenient ways of paying. Hence, it’s a no-brainer to accept this payment method. This means you need to set up an account through a payment processing provider.

  • Online payments: While it rarely happens, there’s still a chance you may stumble upon customers that cannot pay in cash, check, or don’t have a credit or debit card. For that reason, there’s no harm in accepting invoice payments from online payment gateways, such as PayPal.

  • Mobile payments: You can also set up a payment system wherein you only need to read a code of some sort using your mobile phone and you’ll receive the payment from the client. It’s a fairly convenient payment option both for the vendor and the customer.

  • Automatic payments: If your business deals with recurring payments (e.g., weekly, monthly, quarterly), it’s advisable to accept automatic payments. Basically, this is a system where you transfer a certain amount from your client’s account to yours whenever the payment date arrives.

6. Offer a payment plan

Apart from the lack of payment options, your clients might also be struggling to pay you due to their lack of financing. Given the current situation of the world, this is only natural. Hence, rather than asking for the payment outright, you can offer a plan instead. 

For example, you can charge 10% of the cost every month so as not to press the client to gather the money all at once.

Closing thoughts

When customers pay late, it can lead to disrupted cash flow. This can then delay your payments to yourself, your contractors, and your suppliers. Therefore, as much as possible, you should avoid receiving late invoice payments. Of course, a huge part of it depends on the behavior of your clients, but as you should already know, the success of invoicing also largely depends on your strategy.

Sam Makad is a business consultant. He helps small & medium enterprises to grow their businesses and overall ROI. You can follow Sam on Twitter, Facebook, and Linkedin.

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