If you want to take control of your business and really boss it, making sure you’re getting paid on time is vital.
When you sell something in your business, you create credit. The only real exception is in retail premises, where payment is immediate.
But creating credit means you have to wait for payment. And more likely than not, you’ll be chasing up that payment.
It can be a pain.
But life doesn’t have to be like that for your business.
Want to know how you can life easier for yourself and make things easier for your clients, especially during these unprecedented times, when money may be a difficult subject to discuss and being sensitive can help?
Below are nine ways to avoid being in a situation where your business is suffering because money is owed. They’re easy to implement and used by businesses across the UK – so why not give them a try?
1. Use a debit card reader
Is visiting a client’s premises part of what your business does? If so, why not require payment when the work is complete, or the goods have been handed over?
These devices connect to your mobile phone and authorise the payment immediately.
Typically, you pay a small amount to buy the card reader and then a percentage (typically around 2% to 3%) for each transaction.
If you’re concerned about this cost, you could increase what you charge so the fee is absorbed.
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2. Use software to invoice
If you use accounting software, not only can you issue and send invoices with just a few clicks but you’ll also be reminded when it’s time to chase them up (that is, when the terms you agreed have expired).
And chasing up the invoice once you’re notified is again easy if you’re using software.
Compare this to hand-writing invoices, or printing them off in Microsoft Word or Excel.
It’s a lot harder to track when the invoices are due. And even if you create a separate list, that will slow you down, leaving you with less time to do what you love – finding and delighting customers with your products and services.
Let the software take the strain.
3. Add payment links to your e-invoices
If you electronically issue invoices using accounting software, you can add a payment link to the bottom of the invoice.
If nothing else, this makes the conversation with your customer or client easier when you chase a payment.
Rather than having to explain how to pay (e.g. providing your bank transfer details), you can simply say: “You can find the details at the bottom of the invoice I sent you.”
4. Make invoices really simple
This can be an oversight for many businesses.
If you’re registered for VAT, there are some legal requirements – but, again, things can and should be kept as simple as possible.
There’s no need to include your terms and conditions on the invoice, although it’s a good idea to provide a link to them if it’s an electronic invoice (or a URL if it’s a printed invoice).
And you don’t have to include a covering letter either.
5. Offer discounts for early payments
Here’s a neat little trick you could try.
Make it clear to your customer or client that if they pay within 10 days, they’ll receive a 20% discount on the invoice amount.
This can only encourage prompt payment. And you have two choices as to how to finance this discount:
- You take a 20% cut in return for your saved time potentially chasing the payment
- You increase the default price by 20%, with the goal that it’s nearly always discounted for this early payment.
Yes, this is a little like charging interest on late payments. But it doesn’t feel that way to the customer or client.
It’s more carrot-and-stick approach, than chasing and needing to have difficult conversations when you’ve not received your money.
6. Issue weekly statements
Try issuing a weekly statement to your customer or clients detailing how much they owe.
You might find your accounting software has this feature built-in. Issuing a statement like this means clients or customers simply can’t forget what they owe.
And make it clear in your terms of service or your contract that this is a blanket policy you apply to all clients, and that you aren’t singling out that individual customer or client.
Here’s a tip: don’t schedule this task for a Monday or a Friday. You’re likely to be busy doing other things at those times.
7. Use direct debit
If the customer or client uses you regularly, you can ask them to set up a direct debit. This can be facilitated using a payments provider such as GoCardless.
Yes, direct debits can even be used by businesses to make payments.
You’re probably thinking that this can only be used if your customer or client makes regular payments to you. This is what we’ve been trained to believe by using direct debit for the likes of utility bill payments.
In fact, direct debit can also be set up to collect irregular and on-demand payments. A lot of people use PayPal, for example, and this is exactly how they work in the UK.
8. Use an invoice-chasing app
By using an invoice-chasing app within your accounting software, you can save hours of work every week manually chasing payments.
Using the software, you can create an email template, in the same language you use ordinarily, and then set a schedule when the invoice should be chased (depending on the terms you’ve agreed).
When the recipient receives the email, it will look like it came from your email account – but in fact it comes via the software. This helps to keep things looking professional.
Some apps, such as Chaser, will even integrate with your debt collection service (if you have one), meaning they’ll escalate very late payments automatically.
This way, you don’t ever have to manually chase a payment ever again.
9. Sell your invoices
This is a radical idea for many smaller businesses but it’s one regularly employed by larger businesses – and not just when times are tough.
Invoice factoring means you sell your unpaid invoices to another company, so they take on the debt. In return, they pay you around 70% to 90% of the total invoice values.
Once the client has paid the factoring company the full amount, the factoring company then pays you. They’ll charge you a service fee, which is usually around 1% to 5% of the total invoice.
It should be noted that invoice factoring isn’t related to using a debt collection agency. It’s just a method of easing cash flow.
Final thoughts on getting paid on time
Because some people tend to be late making payments, there’s understandably a whole treasure trove of ways businesses have created to get paid on time – or even ahead of time.
Whichever you use depends on your relationship with your client, and how amenable they are.
However, the key trick is to work closely with your client and mention the methods you use to collect payments as early as possible in your conversations with them.
You definitely shouldn’t spring it on them when you issue your first invoice. Instead, make it part of the terms of doing business with you.
People are more able to accept things when they’re in the early stages of a relationship, and you should use this to your advantage.
7 ways to take control of your business
Want to know how you can boss it at your business? Read this guide for top tips to help you master your business admin and truly take control.
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