A smooth inflow of revenue is crucial to the success of any business. But, as reported by CBS Insights, a staggering 38% of businesses close down as they run out of funds. As the owner, it is important to have a reliable system in place allowing your business to have a predictable cash flow.
2nd Life Media CEO, Author and business coach Chris Edwards offers some guidance on how to establish these systems and ensure you are always paid on time.
Set Clear Deadlines
When entering into a contract with clients, convey your payment expectations in clear terms. Additionally, include it in your contract and mention clear due dates on each invoice. Never let your payment deadlines be ambiguous and learn to be firm about payments.
Share Invoices Immediately
There is no good reason to wait for sending an invoice after you have provided your service. Make it a habit to share the invoice immediately on completion. If possible, you can instruct your employees to carry physical invoices and collect payment in person. Similarly, you can automate your invoices so that the customer receives them as soon as the service is updated as complete in your system.
Provide an Installment System
Rather than sending one invoice of a large amount, opt to send multiple of smaller amounts. This makes it easier for clients to pay and ensure you receive money at frequent intervals. Additionally, new clients may show skepticism towards paying a large amount upfront. In this scenario, you can introduce a milestone-based system, where you are paid on completion of 25%, 50%, and 100% of work completed. This will help you land more clients than businesses that do not provide such alternatives.
Itemize Every Charge
Never send an invoice with only the total amount. Break down every charge individually, which can include labor costs, transportation, shipping, packaging, tax, and more. This will reduce the probability of disputes from the customer’s end and ensure there are no reasons to not pay the bill on time.
Additionally, for long-term customers or those with good payment history, you can also provide discounts and mention those clearly on the invoice, helping you improve rapport.
Increase Payment Options
As reported by GoDaddy, In addition to traditional modes of payment such as cash, cheques, and cards, incorporate new methods such as payment apps (PayPal, Venmo, etc.), online bank payments, and even cryptocurrencies if you have a strong understanding of its workings. The idea is to give the customer no excuse not to make payment by providing the highest level of convenience possible.
Follow Up Promptly
Do not wait for weeks to pass before you start sending reminders for payments. Send a follow-up a day after the payment was due. This can include a gentle reminder of the service completion date and the due amount. Sometimes delays can happen due to confusion regarding due dates or the client unintentionally being forgetful about the payment. As the owner, it is your responsibility to follow up and enforce agreed-upon due dates.
For clients who are notorious for paying late, stop providing services until all due payment is made. Additionally, you can also seek the help of collection agencies.
Invest in an Accounting Software
Receiving payments on time is one part of the story, the other part includes efficiently handling funds and making informed financial decisions. To achieve this, it’s important to invest inpurchasing accounting software, which will provide you with the following benefits:
● Automation of Tasks: Whether it be sending invoices, sharing payment reminders, or creating journal entries for transactions, you can automate these tasks and never worry about missing a follow-up or wrong entries.
● Improved Accuracy: In a few simple steps, you will be able to create complex financial statements such as balance sheets, cash flow statements, etc. Additionally, the software will automatically highlight errors if there are any.
When choosing software, look for ones that provide the option of integrating Plaid’s API to get bank transactions information, as it provides 100% security for payment data and allows you access to transaction data as far back as 24 months.
The key to being paid on time is to set clear deadlines, make it easy for clients to pay, and track all transactions using reliable accounting software.
Story written by Cheryl Conklin who created Wellness Central from her desire to share various resources and her thoughts on wellness. Apart
from blogging, she enjoys traveling and going on endless adventures, and writing about her experiences at the end of the day.