By Georgia Phelps, Debtor Daddy
The process of getting paid for your great work begins the moment you start negotiating your services with your customers, not just when you send your invoice.
It may come as a surprise that up to 90% of invoices are paid late. That means 90% of business owners are without crucial cash flow and money in the bank to grow their businesses. This puts small business owners under a huge amount of strain.
We conducted a survey to investigate why invoices are not getting paid. The results were very interesting. Six out of seven reasons given by respondents can be solved by having better invoicing and receivables management processes in place. So here are five easy invoicing tips and our proven strategies for actually getting paid on time.
1. Specify your terms of service from the get-go
We don’t mean that you should answer the phone with a recording of your terms, but close to it. Be clear, very early on, about your fees and terms of service.
The key things to cover are:
- When you expect to get paid.
- Whether you expect all or a percentage of payment upfront.
- How you like to be paid (e.g. bank transfer, credit card, etc).
- What happens if you’re not paid on time.
This doesn’t make you sound money-hungry. It makes you sound professional. Make sure your customer clearly understands and signs off on your terms.
Also, ensure you know exactly who to send your invoice to. According to our survey, 26% of respondents said they haven’t paid an invoice because it was sent to the wrong person or email address.
2. Make sure your invoice is user-friendly and correct
Use accounting software or a professional template that produces well-designed payer-friendly invoices. Your payment terms, name, business particulars and contact details should be clear.
The results of our survey found 25% of non-payers didn’t cough up the cash because the invoice items or amounts were incorrect (oops). Check and double-check your calculations, and ensure any variations from your original quote have been discussed and agreed upon with your customer.
Keep in mind it may often be the accounts department, and not necessarily your contact person, that pays the bills, so include your signed agreement with your invoice where possible.
3. Clearly outline the particulars of your fees
Itemise your accounts and include details of hourly rates, or units provided, and a clear description of your products and services. Ensure your invoice aligns with your terms and agreements with your client. By just stating ‘my services’ and the balance owing, you run the risk of your invoice getting a one-way ticket to the ‘needs to be queried’ pile.
4. Be friendly and nurture relationships
“Attn: John, invoice attached.”
Not very endearing. Nurture your relationship with your client (and whoever pays the bills), address your customers and thank them for their business.
“Dear [valued person who pays the bills],
I hope the week is treating you well. Please find my invoice attached, for works completed, as per the attached agreement.
Thank you for your business. I look forward to working with you again in the future.
Don’t hesitate to get in touch if you have any queries.
Me [and my clear contact details]”
It also helps to contact your larger customers by phone to ensure they have received your invoice and can confirm everything is in order with the works completed and the invoice itself.
When you’ve followed all the above, and your invoices are still not paid on time, the next (and possibly most important) step is to follow up with your customers.
5. Automate your accounts receivable processes
We don’t know many business owners who look forward to chasing their clients for money. Why would you, when you’ve worked hard to win their business and build a rapport? But unfortunately, a timely follow-up system is essential for every small business.
Your accounts receivable process should include:
- Automated friendly reminders before and after your due date.
Choose your wording wisely to ensure your relationship doesn’t turn sour. Give your customer the benefit of the doubt and keep it light, with something like, “Oops, did you forget?”
- A follow-up phone call.
This too should be friendly and conducted by someone who is not you. A professional receivables manager knows the lingo and how to woo your clients into getting your invoice paid.
- Sending a letter of demand.
It sounds awful, but it must be done. If your job is completed as agreed, your terms of service are rock solid and your invoice is correct, your money should be in YOUR bank account, ready to support YOUR business. More often than not, an invoice will be paid upon receipt of a letter of demand, unless there’s a clear dispute.
- Taking legal action.
This is the last resort. When all else fails and you’ve followed all the above, sometimes it’s the only way.
Invoicing and debt recovery technology
Wouldn’t it be wonderful if small business owners could perform all these duties on a daily basis? The truth is, most do not have the time. Those who have made time could be spending it on planning for the future, not chasing outstanding invoices for past work.
Technology has evolved to make everything faster, smarter and more efficient. If your business systems haven’t evolved accordingly, your competitors will soon be ahead of you in the game, even if you provide a better service.
Track your hours properly with a system like TSheets. Streamline your accounts and bookkeeping systems with software like MYOB, QuickBooks Online or Xero. Integrate your accounts system with receivables management software to help get your money in the bank faster and keep your customers happy.
Then you can get on with doing what you do best.
Debtor Daddy is your dedicated virtual receivables management system. We become part of your team. We learn your products and understand your customers. With customisable automated email reminders and human phone calls, we apply the perfect amount of tact and persuasion to get your invoices paid.
About the Author: Georgia Phelps writes on all things accounts receivable. She’s all about supporting small business and building lasting relationships. Like all SMEs, she also likes to get paid. When she’s not writing, invoicing and following up, she’s chasing her small children or playing golf (badly).