One of the biggest bug-bears for small business owners is late payment. Your cash flow depends on payments being made on time and you don’t have huge reserves to help you get through periods of non-payment. But if you can implement some straightforward invoicing solutions, you could start to recoup what you’re owed, and make sure your creditors pay you on time.
So here are some of our top tips, based on our virtual assistant accounting support experience:
Credit check your new customers
If you’re welcoming a new customer on board, it’s not rude to check their credit history – it’s good business practice. Your bank might offer a credit check service, or you can run a check with any of the major credit agencies such as Experian or Equifax. This will give you a clearer idea of whether your customer is credit worthy, and therefore in a strong position to pay you.
Get your invoicing details right
Instead of invoicing to suit your business, why not invoice to suit your customer? If you know when they run their supplier payments, you can make sure you have your invoice in and approved in time to make the next payment run. You should also make sure that you have everything you need on the invoice – don’t give your customers any excuse to reject your invoice. If you need a purchase order number, make sure you have one. If you need to set out your services or costs in a particular way, make sure you do so. If you invoice needs to be addressed to a particular department, make sure it is.
Think about retainers
Putting a client onto a retainer means they are committed to paying you an agreed amount every month. This means there is usually a contract to that effect in place and you can ask your client to set up a direct debit. Credit controllers find this extremely useful, because the payment comes to you directly and reliably every month.
Use an online invoice management tool
One of the reasons that invoicing is such a chore for small businesses is that they are often doing everything manually. This means that invoices can get missed, systems don’t get updated and people forget to chase unpaid invoices at all. It’s not expensive to use an online invoicing solution. In fact, alongside considering outsourcing to a virtual financial assistant, it could be the investment that brings you the best return on investment. Everything is covered for you, unpaid invoices are chased quickly and you have a much clearer idea of the cash that is coming into your business.
Make your payment terms clear
Small businesses often neglect payment terms. Either they don’t decide on them at all, or they don’t tell customers what they are. Make sure your invoice says clearly when it is due. You can also add a statement about late payment charges – you are legally able to do this under the Late Payment of Commercial Debts (Interest) Act. And then make sure that you add those charges at the appropriate time if the invoice remains unpaid.
Ask for a deposit
If you invoice on the completion of work, it’s a good idea to start asking for a deposit, or to organise staged payments, depending on the nature of your work. This means that you don’t have to wait until the end of your project to get paid. Your customer shows commitment by paying the deposit, and then you can agree payment terms for the balance.
To find out more about how your business can start to implement invoicing solutions that help you to get paid faster, feel free to call us on 0800 994 9016 or use our contact form in the menu above to see how we can support you.
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