Dotting your ‘i’s and crossing your ‘t’s It might sound obvious but making sure you’ve entered all your details correctly can save you a lot of hassle in the long run. If you’re using paper-based invoicing, make sure your buyers have all the right information, even the basics such as your address and contact details. Missing information and inaccurate data on invoices can often cause payments to be delayed for days or even weeks and you may not even know there is anything wrong until after the payment has passed its due date. Chasing late payment because of pointless errors is not only frustrating, but is a huge waste of time for smaller businesses working with limited resources.
Think ahead Efficient and accurate use of purchase orders can help improve financial planning and control of spend. If all purchases are documented and/or approved on a regular basis, you will have visibility over your current liabilities, meaning fewer surprises in the form of invoices turning up for large purchases that the finance department weren’t aware of. Likewise before issuing sales invoices, it’s a good idea to request purchase orders from your customers – it will speed up the approval process and favour fast payment.
Set expectationsDon’t sit on invoices; send them out immediately and be careful to clearly state your payment terms. Don’t feel pressured to set 30-day terms. There’s no reason why you can’t set seven or 14 days (unless negotiated otherwise by a customer) and you are likely to find that even if the payment is late, you will receive it within 14 or 28 days. Sometimes offering your customer an incentive or discount for early payment is a good way to ensure you are paid quickly. If the customer requests a copy of the invoice make sure you send it to them on the same day. It also helps to include full details payment (cheque, bank transfer and so forth). By making it easier to be paid you make it easier for you to get paid.
Do not be afraid to ask for paymentDo not ignore overdue invoices in the hope that they will magically be paid the next day. Make contact with the customer as soon as the invoice becomes overdue – cash flow is what keeps you in business after all. Small businesses sometimes worry that by demanding payment as soon as the credit terms have expired, they may lose future custom but this is rarely the case, it’s just business. The worst thing you can do is let outstanding payments go unaddressed for weeks and weeks. It can also help to pick up the phone and speak directly to the customer. A verbal request asking for payment can go a long way as they will be obliged to address the matter with you there and then.
Get to know your customerMake sure you know who you are dealing with by doing some research. Is it a limited company or a partnership” What’s the registered address” If it’s a new business or an order of high value, if possible, carry out a credit referencing check on the customer to ensure that they are credit worthy. And, where appropriate, you can also consider requesting a deposit.
Establish a paper trail Set out formal terms of business or a booking form for all of your customers, without exception! It is also worth considering a provision for late payment penalties if invoices are not paid on time. They can act as a strong deterrent against late payment and can compensate you should invoices be paid late. Where possible try and chase early debt in writing so you have a written record; keep good notes of your conversations, the commitments made, when payments were received, what emails, copy invoices etc that you sent to the customer.
Choosing the right method for your businessIt’s worth checking if any of your customers are using eInvoicing methods, so you know what your options are. Then consider which method works for your customers and request that they activate you on it. Most small businesses still use paper-based invoicing systems but investment in an automated payment process, which might seem like a big ask when money is tight, can offer you huge potential for long-term savings. If you don’t have to manually check, internally distribute, or locate and archive paper-based invoices you’re saving your organisation a significant amount of time that can be invested back into your business instead.