Overdue or late payment of invoices puts unnecessary strain on business finances. The struggle is even more real during periods of economic uncertainty like Brexit or the pandemic.
Understandably, organizations want to hang on to cash reserves for as long as possible, which sometimes means you’ve got your work cut out for you. The most common reasons stated for late payment of invoices include:
- Waiting for payment from their customers
- The cheque is in the mail
- They haven’t received an invoice
- The usual accounts payable person is not available
So, what can you do to avoid awkward conversations and get your clients to pay on time? You can always rely on your debt collection agency, but before you do that, try a few of our favorite strategies to encourage prompt payments from all your customers.
1. Know Who Handles the Bill Paying
Think carefully about invoicing the people requesting your products or services. Are they the same people that pay the bills? If not, then you could face delays in receiving payment.
The person you are billing may sit on your invoice before getting around to passing it onto their manager, who likely already has a full inbox. It could be a while before accounts receivable receives your invoice. You could face even more delays if there is a query about an item listed on the invoice or the amount owing.
You want to build a good relationship with the person you are dealing with, but you should also get to know the person who handles the bills. Getting to know them will help you avoid those awkward conversations in the future. Plus, when you have a good rapport, your company will have a higher priority when they are choosing who to pay next.
2. Time Your Invoices with Payment Runs
Smaller businesses often pay invoices as needed, but larger organizations will organize creditor payments around the same date of every month. If your invoice arrives the day after a payment run, it will go into next month’s pile.
You can avoid this delay by syncing your invoice due date to a date before the payment run.
You can also keep better tabs on when it’s time to start chasing late payments. For example, if you know the company in question processes their due invoices on a Friday, you should start chasing the invoice at the start of the week to make payment more likely.
3. Send Invoices Immediately
Delaying sending your invoice sends a message that payment is not a high priority. Small businesses are always looking for ways to artificially extend their lines of credit, and a tardy invoice gives them the perfect excuse.
Chasing late payments on these invoices also creates challenges. The transaction won’t be fresh in your client’s mind, and there will be further delays as your customer checks their records to find out what the invoice relates to.
Send your invoices immediately after you have supplied the goods or service. Modern accounting solutions allow you to do this via a mobile device, even while you are still with the client. It’s also a good idea to let your customer know that you have just issued the invoice.
Sending electronic invoices will reduce bottlenecks in the payment system. Sending invoices through emails is a good substitute for those clients who don’t agree to automatic recurring billing.
You can save a lot of processing time with electronic invoices, as your accounting software does most of the hard work. Customers who receive an electronic invoice also have the option of paying immediately by simply clicking a link in the email.
4. Set Up Recurring Billing
Recurring billing is a fantastic option to ensure all of your clients pay on time, every time. Forgetting or overlooking payments is a regular occurrence and a problem that can be avoided with a recurring billing system.
You set the system up with your client’s details, the payment amount, and the payment method. From then on, the billing software automatically charge’s your client’s credit card or debit account for the amount, and your clients receive a receipt via email.
A recurring billing system can potentially free up a lot of administration time that you can better use to grow your business.
5. Setup Payment Agreements in Advance
Agreeing to payment terms in advance sets you up for a steady cash flow. Strategies you can use include providing long payment terms and using a discount to provide motivation for early payment. You may be sacrificing a small sum each month, but a reliable cash flow is worthy compensation.
6. Use a Database to Track Payment History
Successful small businesses will have a long list of clients that could make it challenging to keep track of which clients are up to date and those lagging behind with late payment of invoices.
An online customer database will help you keep an eye on your cash flow by keeping track of late payment of invoices from one convenient location.
A database is a step above the spreadsheet many businesses use and delivers more functionality in the sorting and searching department. You will instantly be able to see whether it’s time to call in the debt collection agency or send a friendly reminder.
7. Provide Different Payment Options
Companies today have a lot of choices when it comes to making a payment. One way you can reduce late payment of invoices is to offer a range of payment solutions.
If your payment options are not convenient for a busy accounting department or small business owner, you can bet that your invoice will be shuffled to the bottom of the pile.
Give your clients more ways to pay, and you will get paid faster and have less reason to get the debt collection agency involved.
Debt Collection No win No Fee
Late payment of invoices is a problem every business faces sooner or later. In the most challenging cases, you can rely on a debt collection agency to help you improve your cash flow.
The strategies outlined above will significantly reduce your reliance on a debt collection agency. However, when you’ve tried everything else, it might be time to call our debt collection no-win no-fee service to help you get your finances back on track.
Do you need help with late payment of invoices? Our services might interest you! Contact us and enjoy the benefits of a good debt collection agency.