Cashflow is responsible for 82% of all business failures, 50,000 businesses go under every year because of late payments. Getting invoices paid on time is crucial to the survival of even the most established businesses. Below is a few proactive measures you can take to ensure your invoices are paid on time:
Make Paying Easy
Give your customers options when it comes to paying, some companies find it easier to make payment by credit or debit card, rather than setting up a bank transfer, or even direct debit.
Many new payment methods such as Stripe or GoCardless allow your clients to make payment direct from an invoice generated in accounting software such as Xero. All they need to do is click the ‘Pay Now’ option and you’ll receive the payment direct to your bank account in a few days, if they choose to pay by Direct Debit, payment will be taken automatically on the invoice due date and deposited into your accounts a few days later.
Customers are much more likely to pay if your invoice is prompt than if you send it late. Payment departments can be complex, it’s easy for invoices to get lost or forgotten about. Invoicing early or on time encourages prompt action which makes it more likely your invoice will be processed quickly.
A small minority of businesses will actively avoid paying invoices unless they are chased for it. Invoicing late signals that you may also be late in chasing up your invoices.
You need to ensure that you scale up your administration to match your business growth, things can start to slip through the net, invoices may be left un-chased, and debtors can start to build up. When invoices are due it’s worth sending a polite reminder, with further reminders for those that are late, your accounting software can be set to automatically send these reminders. The same software can also quickly pull up reports with details of your debtors and how overdue they are.
You need to be crystal clear about your payment terms with your clients, and any penalties for late payment, such as admin fees and interest.
Many larger businesses understand the importance of helping out smaller suppliers. It may be possible to negotiate more favourable payment terms or that you are paid a proportion of your invoice up front.
The latest accountancy softwares can show you all of your financial information in just a few clicks. They make it easy to create invoices, send them, establish payment terms and chase them up. They also show you when invoices have been paid, and what is outstanding.
KJG is a Platinum Partner with Xero, one of the UK’s leading accountancy software tools, for more information on what we could offer your business, get in touch on 0161 832 6221 or email firstname.lastname@example.org.