The customer is always right, however, the customer also tends to not pay on time. For a small business owner, this is one of the most frustrating things – to get work done promptly and having to wait ages for the compensation. “It comes with being in business,” some people might tell you, but does it really have to be?
Nope! Check out these tips and practices designed to get your clients pay their invoices on time or earlier:
- Offer a small discount for early payment
A small discount on their total cost or any kind of small incentive for early payment should entice the customer to be more punctual with their invoice payment. Don’t forget to advertise this incentive and include it in the contract or wherever in your physical location (maybe even social media!)
- Go digital with your invoices
In a world where almost everything is done online, if you haven’t digitized your invoices at this point (with a business bank account to receive electronic payments), you’re causing a lot of unnecessary delays for yourself. It is easier for most people to click a few buttons on their phones or computers than going through the effort of snail mailing an invoice. It promotes efficiency and quickness for both sides, and it helps save trees!
- Invoice Factoring
For those who are unaware of what invoice factoring is, it is a financial transaction where a business sells its invoices (accounts receivables) to a factor (such as Copperwood Capital). The factor then pays 70-90% of the invoice and once the full invoice is paid by the client, the business gets the full amount (minus fees). This allows you, the business, to free up your cash and use it to meet expenses, cover payroll, or for some extra working capital.
For more information on how factoring works, check out this infographic.
- Be consistent with the follow-up
While this might seem like an obvious tip, it’s still worth reiterating. Do not underestimate the value of making follow ups. Don’t hesitate, make your follow up clear, and get directly to the point. Emphasize the date you want the payment by and if they have already missed that date, set a “deadliest deadline” date in the follow up.
- Customize a payment schedule with the client
Not all businesses work the same and some might be going through changes that may reflect on their ability to pay on the time set. Talk to your customers and, based on their current situation, create a new or a temporary payment schedule and terms that will benefit both parties.
- Send invoices right away
Small business owners have a lot on their plate and sometimes things fall through the cracks. Don’t let sending out invoices be one of them. Develop a habit of sending out invoices as soon as the work gets done. The faster you get it to the customer, the more chance of getting paid early by them.
- Have clients pay upfront
This might be the most effective way to get paid on time but it’s not always feasible, depending on the client or the type of business you’re in. If that’s the case, the best way is to at least try to get a significant percentage of the invoice upfront to make the paying process easier and faster in the coming weeks/months.