Collection can get stressful and tricky. As a business owner, getting paid on time is imperative for adequate cash flow and the overall ability to function as a company.
It’s not always as simple, especially for service-based business structures.
Here are 5 tips to help you get paid faster:
1. Invoice Promptly
Invoicing promptly is important for your on-time payments. If you forget to invoice, or send it late, not only do you look unprofessional, but you can’t expect to be paid on time.
Internally within your company, consider preparing the invoice in advance for it to be ready when needed. This will save time and get you one step ahead.
You can consider scheduling an email with the invoices to avoid forgetting later, have an employee dedicated to sending the invoices, or set up automatic invoices to be sent with software.
2. Presentation Matters
Having a professional invoice makes a difference; to have clients take you and your company seriously. Ensure all names, addresses, products, and services are spelled correctly.
Branding matters. Having a custom invoice with your company logo and/or color theme can help build a superior perception clients have of your company. Keep it professional but stay consistent with the overall theme of your company. For example, an art company may consider a more creative design compared to an audit company who may strive for a more serious design.
Consider how you’d like to systematically provide invoices. Digital and physical means. Which do your customers prefer? With the push to digital, this may be your preferred first method of delivery. Perhaps mail could also be utilized for larger amounts or certain cases.
3. Offer Various Payment Methods
Don’t make it hard for customers to pay you. Offer various payment methods and payment plans for larger amounts. If customers ask for specific payment methods such as Zelle and Venmo, perhaps you can consider adding them to your company’s accepted payment methods.
Pro tip: Ensure they have the correct channels to pay you. For example, if your client sends a Zelle to the wrong company, there’s no way for them to retrieve it back.
Speak their language and adapt to their needs. Once you do so, they will feel more comfortable and feel better paying on time, in the method they desire.
Pro tip: Proceed with caution for payment methods that could be reversable such as Venmo.
Lots of people are busy and don’t read. Explain the various payment methods multiple times. (i.e. On the invoice, in the email, over the phone…etc.) The easier it is for people to pay you, the faster you will get paid.
Pro tip: If you accept credit cards, it may be worth considering to upcharge for the merchant fee you pay. This is becoming a more common practice that sometimes people expect. You may include a discloser on your invoice, website, or business front.
4. Automate
Software that will help you automate your invoicing could be a strategic investment to ensure the process of collecting receivables is more streamlined.
Certain software can automate from start to finish. You may set up reminders at certain periods in time and decrease the human labor necessary to follow up periodically.
Pro tip: Proceed with caution if you plan to tie your invoicing software to your bookkeeping software. Duplicates and integration issues are common. Using the same software could be considered. Speaking to your accountant may be helpful to avoid issues down the line.
5. Consider Deposits and Up-front Payment
For large projects, deposits may be the best option to ensure you recoup some of the cost up front. This is a standard procedure and can be included within your service agreement contract.
You may also consider collecting the full amounts up front prior to beginning any work. This may work in certain situations or become a standard practice of your business.
Collection isn’t easy, but utilizing these tips could help increase your collection process and incoming cash flow so your business can run smoother.
Accounting Tip: Invoice and record payments received in one system.
From an accounting perspective, it would be most effective to invoice and record receipt of payment in one system. The most common in America is QuickBooks.
Recording receipt of payment from customers will help you understand what’s left to collect, avoid duplicate invoicing, and increase the accuracy of your accrual vs cash basis accounting.
When viewing your financial statements, an accrual-based profit and loss statement will show the total income earned. Cash based financials show the total income received. The distinction between earned and received makes a significant difference on your company’s bottom line.
Need more help or clarification? Contact us today and speak to an expert.