One of the struggles that most entrepreneurs face is having their clients to pay their invoices on time. Late payments not only cause gaps in the cash flow but can also affect the business’ operations, as well. Because of cash shortages, operation costs can start piling up and could cause shortages even more. That is why most business owners often feel the need to apply for invoice financing.
Trying to have your clients pay on time can be daunting and intimidating. But if you don’t do it, you’ll be leading your business to its demise. Getting paid on time means you can also pay your company’s supplier and other payables on time, take advantage of discounts and incentives, and most importantly, improve your company’s cash flow.
So, how do businesses do it? Here are some proven ways to turn those invoices into payments quickly:
- Present Your Payment Terms Clearly
Payment terms should be stated clearly in the contract. Make sure that your clients go through the whole payment term and that they understand the guidelines. Your part as an entrepreneur is to clearly define the payment terms to the clients so that there are no misunderstandings. Remember that only verbal agreements, emails, and word of mouth aren’t enough to solidify the contract. So, be sure to have all agreements written on paper and signed. A good way to handle contract management is to have a digital contract repository rather than digging through a dusty old filing cabinet.
This is effective because by having access to your contracts digitally you can leverage a cloud system to bypass logistic issues.
Be specific in your payment terms, as well.
Clearly define your payment period and the ideal payment method. The more specific your terms are, the better of you’ll be. If you’re charging a fee for late payments, be sure to mention that to your clients in the beginning, as well.
- Set up a Payment Reminder
If you’ve been facing late-paying customers for some time now, then it’s time to call for some backup. A lot of software companies now offer reminder applications to help business owners remind their clients of their dues. This automated software can be programmed to set up a payment reminder a week or day before, on the day, and even after a few days after the set payment deadline.
If you have a 30-day payment rule, it’s a great tool to use as 30 days is a lot of time to forget things, including payment deadlines. Another helpful tip is to add a link to the invoice and the method of payment at every reminder. This way, they can immediately do the payment, in case they forgot the deadline.
- Make Payments Easier
In running a business, it’s always important to state how you want your clients to pay you. Be sure to include these in your payment terms and contract, too. Be sure to communicate to your clients how they should make the check and if you’re using online payments, give them the correct details of your company’s account.
Other than that, you may also want to discuss what payment method your clients are used to. Nowadays, a lot of customers and businesses have allowed clients to pay for services or goods using credit cards. Integrating this system into your business may just be what you need to make payments easier and faster.
- Reward Clients Who Pay Before the Deadline
Offering incentives for clients who pay upfront or before the set deadline will encourage your clients to pay on time. For instance, for clients ordering in bulk, you can offer a 10% discount if the invoice is paid within days after the purchase but before the due date. If your clients know that paying early will give them an additional benefit, they will usually take you up on the deal and make the payments earlier.
However, before deciding on the discount, you may also want to assess if your business can afford to offer said incentives. If you’re not dealing with late payments from your customers, then investing in this type of arrangement may not make sense. Unless you’re having a serious cash flow issue because of late payments, early payment incentives may not be worth it.
- Don’t Hesitate to Follow Up
Even if you have a reminder set up in place, it’s also important to do follow-ups yourself. Your clients are busy and they might have not noticed the reminder in their email. If the payment deadline has passed and they still haven’t paid, consider calling them yourself. Some of your clients may even appreciate it and consider it as an act of professionalism. So, follow up frequently until they pay.
- Send the Invoice to the Right Person
When dealing with larger companies, it’s important to know the right contact to send the invoice to. Not only will this avoid confusion, but this will make payments faster, too. So before embarking on a business with large corporations, be sure to clarify how the payment will be made. If it’s through an email, be sure to ask who it should be cc’d to. It pays to take at least a minute or two to discuss the payment arrangements as it will save you from so much stress and hassle at the end.
Manage Cash Flow Problems With Invoice Financing
Cash flow is the lifeblood of a business. That is why it’s always important to have the clients pay their invoices on time to avoid cash flow issues. If you’re still having problems managing late payments even with these tips, then maybe it’s time for you to apply for invoice financing. Not only will it help you get your payments faster, but it’s also a great way to improve cash flow for your business.