8 Business Invoicing Tips and Tricks to Get Paid Faster
When customers don’t pay on time shit gets real, real quick – check out these 8 business invoicing tips to get paid faster.
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A positive cash flow is essential to keeping your business more resilient. Unfortunately, late invoice payments have plagued businesses for decades.
According to statistics, 60% of invoices are paid late.
The Coronavirus pandemic has also impacted overdue payments. The latest studies warn that the number of unpaid invoices has increased a notable 25% since this time last year.
Often times, the last thing entrepreneurs think they’ll need help with is invoicing, but when you find yourself behind the 8 ball, business invoicing tips will be a welcome resource.
This article teaches you how to optimize your invoices and get paid faster.
1. Analyze your Invoicing System
If most of your clients exceed payment deadlines, it indicates that your invoicing system lacks optimization. Analyze your invoicing system and revise the effectiveness of your accounting tools.
For starters, if you are still sending invoices manually, you can shift to automated solutions that reduce the risk of human error and add consistency to your invoicing strategy. For example, you can automatically send ACH payments, track your cash flow, customize invoices, and create reports anytime, on any device.
Also, revise your communications with clients. Make sure your invoices are straightforward and easy to understand. A strategic billing system can increase customer satisfaction.
2. Send Invoices Immediately
One of the simplest ways to track the accounts receivable and the accounts payable is to send invoices as you deliver a service or sell a product to a customer. This tactic benefits your business in multiple ways.
For starters, it simplifies the collaboration with repeat customers and makes your billing system more transparent. For example, your regular clients may want to make payments at the same time every month. Knowing when to expect your invoices, customers will trust you more and make payments on time.
Additionally, you will also stay on top of your finances. Your accounting tool will record every issue you invoice, allowing you to effortlessly monitor your cash flow.
3. Do not Forget to Send Reminders
Sending reminders is an essential element of the invoicing process. That is one of the most effective ways to reach out to clients and remind them of their due dates without sounding unprofessional or aggressive.
Most importantly, you do not need to send out reminders manually. You can use cloud-based invoicing software to create custom templates that meet client needs and preferences.
Send the initial reminder one week before the deadline and the second payment reminder on the date the payment is due. For late payments, send reminders one week after the deadline. Repeat the process two weeks and one month after the payment was due.
Keep all reminders short, friendly, and informative. If your payment request emails do not work, call the client directly.
4. Set Straightforward Due Dates
When sending invoices, many companies do not set clear payment deadlines. For example, they tell clients to make their payment within 30, 60, or 90 days from the invoice date.
However, clients may find this terminology confusing. Consequently, this leads to misinterpretations and delayed payments. Apart from affecting your bottom line, late payments may also compromise your relationships with your loyal clients.
To minimize misunderstandings, set clear due dates. For example, instead of asking a client to make a payment within 30 days, tell them that the payment is due on DD/MM/YYYY.
5. Provide Rewards to Clients who Pay Early
To encourage customers to pay on time or early, incentivize them regularly. For example, one of the most popular rewards is giving discounts to customers and clients for early payments. If a client needs to pay for your services within 30 days, you could offer a 5% discount for payments made in the 15-day time.
Sure, the types of rewards and discounts depend on your products and services. For example, providing a 10% discount on a $30 laptop mouse does not make sense. Provide special offers for large purchases only.
6. Impose Late Payment Penalties
Sometimes, you need to be rigid when handling overdue payments. That is particularly important if you have already set clear deadlines and agreed on the payment terms. If your reporting system, reminders, and honest communication does not resonate with clients, consider imposing penalties on late payments.
You want your late payment penalties to be legitimate. Talk to your corporate lawyer about this strategy. Disclose a detailed part about overdue payments in your sales conditions, contracts, and invoices. Make sure you specify how late payment penalties are billed. For example, the rate could be somewhere 8% – 15% per year.
Most importantly, remind your clients about these penalties in your regular invoices to encourage them to make payments on time.
7. Keep the Content of Invoices Professional
Never let negative emotions compromise the relationships with a client in the long run. When writing invoices and reminders, you need to sound resolute and, yet, professional. Therefore, carefully choose your wording.
For example, using phrases like “Dear X” or “Please,” you will leave a stronger emotional impression on your clients and inspire them to keep doing business with you in the future.
8. Elaborate on the Type of Services You Provided
When a client is not familiar with your billing system, they may be shocked by the amount of money they need to pay for your services. Consequently, they may avoid paying for your work.
To avoid situations like these, consider building a detailed estimate during the negotiations.
Consider all the factors that may impact pricing, including the time and materials needed to complete the projects. By describing your services in advance, you will build trust with a client and ensure they understand your conditions. After signing the agreement, they will be legally obliged to pay for your services within the time you specify.
Optimizing Invoices is Essential to Getting Paid Faster
Optimizing your invoicing strategy is vital to keeping a positive cash flow. From investing in automated accounting tools to sending regular reminders, you can use these business invoicing tips to get paid faster.
How do you optimize your invoicing system? What tactics do you use to get paid faster? Please, share your thoughts with us!