For many small and B2B businesses, invoicing is the preferred payment method. It’s become normal to ask your customers for payment, even after they’ve received your goods or services. The act of invoicing is a process is one that we’ve grown accustomed to – but that doesn’t mean there isn’t plenty of room for improvement. No one walks into a store and says “I’ll pay you in a month or so but I’ll still take your product or service today.” However, you can still make tweaks to your invoicing that can help speed up payments without completely changing your payment policies. Here’s what your business can do to eliminate invoicing pains and ensure you’re paid today.
1. Take Credit Card Payments on the Spot
Accepting credit card payments upfront is an easy way to ensure you’re paid on time. There are many ways you can accept credit card payments ranging from traditional POS systems to online payments and mobile payments. Online payment solutions almost always come with email receipts that are automated. You and your customer get a record of the transaction making reconciliation easy and help reduce chargebacks. Find a payment solution that’s right for you and how you do business. You loose a bit of money to processing fees, but maintaining cash flow is totally worth it. Don’t waste you or your staff’s energy running after unpaid invoices if it can be avoided.
2. Thank Your Customers
A genuine thank you note in your customer invoice is personalized and will be remembered. Freshbooks, an online invoicing company, discovered that adding a ‘please’ or ‘thank you’ to an invoice increased likelihood of payment by 5%. Showing gratitude is heartfelt and shows you’re a business who keeps their customers at heart.
3. Remind Customers Before a Payment is Due
An easy way to avoid unpaid invoices is to send a friendly reminder email. Keep it casual, reminding your customer of what’s due and thanking them for their business. Proactively reaching out to your customers with a short note is better than receiving an overdue notice saying their payment late.
4. Start Taking Deposits
Depending on the nature of your business, taking deposits can be a good way to approach customer billing. With large jobs or big-ticket items, taking a deposit gives your customers a chance to split up the payments to wallet-friendly chunks instead of a lump sum. There are automated payment systems available that can schedule deposit payments for you and set your customer up on a recurring billing plan – just set it and forget it. The more flexible you are with payment options, the higher chance you’re going to get paid in full and on time.
5. Charge Late Payment Fees
Implementing a late payment fee will help reduce the number of unpaid invoices you see. It sucks to have to slap another fee on your customer’s lap but in this case, it ensures late payments won’t happen as often. Typically, businesses charge an interest fee depending on the number of payment periods an invoice is overdue. Charging late payment fees can be inconvenient to your customers, but they’ll understand why you need to do it. They most likely have a business of their own or know someone who does. They know that cash flow is king so they’ll pay it forward. Literally.
6. Reward Early or Full Payment
Charging a late fee is one way to motivate your customers to pay you on time. Another way to motivate payment is to reward customers to pay you early or pay the full invoice amount upfront using incentives. An incentive could be a percentage discount, freebies, additional work at a reduced rate, or future discounts or credits. Sky is the limit to what you can use as a payment incentive. It’s a simple way to thank your customers, build loyalty and get you paid.
7. Make Sure Payment Info is Accurate
Before you send invoices out, make sure you have all the necessary information your customer needs to authorize a payment. Some businesses have a custom process or list of requirements to be fulfilled before sending a payment. The last thing you want to do is delay the payment process by having to re-issue an invoice. Check if your customer needs a purchase order number or if an invoice ID will suffice; if they need a detailed breakdown of services and hours spent on a service or if a simple description will work. Be detailed and cover your billing bases. It will help you ensure all payment requirements are in order so there’s nothing in the way of you getting paid.
If you’re selling to other businesses, they’ll have an accountant or accounts payable department that handles all service and vendor invoices. Introduce yourself and build a relationship with them. Having that ‘in’ with the payments gatekeeper can mean the difference between your invoice going unpaid, or being at the top of the ‘To-Pay’ pile.