We’re hearing this a lot at the moment, from all shapes and sizes of business: “How do I get paid faster?” It’s a real issue, but there are quick wins in getting people to pay you faster:
No, not the magazine my Mum sends me, but keeping your admin and business housekeeping in order, so make sure you:
1. Send your invoices straightaway
Don’t wait til the end of the month to pay your invoices, and don’t save them all up until you have a quiet moment.
The longer it takes to send an invoice, the longer your cash cycle is (the time it takes for cash to flow through your business)
2. Consider asking for payment up front, or in instalments
Cashflow is vital for any small business, but especially small businesses.
If you’re working on a project that’s going to take some time to complete, you should consider asking for payment up front, deposits or instalment payments (sometimes called stage payments). Otherwise you’re going to be out of pocket for quite a while.
An upfront payment could be for the whole job, or part of it. If it’s a brand new customer, you could consider requesting 100% upfront payment before starting work, as this new customer is an unknown to you, and there’s a potential risk of not getting paid at all.
Deposits are also great for not only helping cashflow, or paying for materials, but also commits your customer to the work.
3. Create and send your invoices through an online software system
It makes perfect sense, and saves bags of time to use your online accounting software (our top favourite is Xero) to raise and send your invoices, and there are lots of benefits to this.
You may also have a separate online invoicing system, but ideally this should talk to your accounting software.
Benefits to invoicing online:
- Software retains your customer details (contact details etc)
- Automatic invoice numbering (HMRC like this, if they see gaps in your invoice numbers they get suspicious)
- Price lists are saved, so less chance of charging the wrong price
- Automatic calculations (the number of errors in calculations we’ve seen on invoices created in Word!)
- Credit control – see who owes you, when the due date is, and when you’ve been chasing
- Setting up payment services so people an pay you online (more below)
4. Review your payment terms
You don’t have to have 30 day payment terms. Do you know why there are even 30 day payment terms?
Because of the time it used to take to:
raise the invoice, print the invoice, check the invoice, post the invoice.
wait for the customer to open the post, check the invoice, approve the invoice, schedule for payment, approve the payment, write the cheque, walk to the post box.
wait for the post to arrive, open the cheque, enter it in your paying in book, wait until the bank us open, walk/drive to the bank, wait in a queue. And then wait patiently for 5 days for it to clear through the banking system. You’ll be waiting longer than that to cover weekends and bank holidays too.
So, you actually don’t need to allow for all of that to happen any more, because you can now send your invoice online, and get paid faster!
And that is why you should change your payment terms to an earlier period.
Our payment terms are payment within 7 days of the invoice date, but most of our work is quoted through our online proposal software Ignition, which collects payment automatically for us.
5. Chase your unpaid invoices
Most business owners hate chasing for overdue invoices, or don’t have time. But if you don’t chase up payments, you’ve effectively done the work for free. Don’t do that.
Late payments are a real cause of business failures, so it is essential to manage your credit control efficiently, and always make sure that invoices are paid on time.
Imagine if your unpaid invoices were automaticallly chased on your behalf. You get to maintain your relationship with your customer, and the credit control and invoice chasing gets done in the background.
Make it easy for people to pay you
You can easily make it super easy for customers to pay you.
There are lots of ways to get paid online, you don’t have to wait for customers to write a cheque, or send a bank transfer.
It’s time to take back control of the payment process!
The best invoicing or accounting software will enable you to set up payment methods, which make it super easy for customers to pay you.
When you send a Xero invoice with payment services set up, your customers see a great big green PAY NOW button, so they can pay straightaway.
I know they can set up a bank transfer, but this creates more friction, and is a bit of a pain.
When I receive an invoice from a supplier, I’d much rather click a Pay Now button and enter my card details, instead of going to my online banking, getting out my card reader to approve a new payee, and then make the payment.
It’s just a pain, and means it takes longer to pay (have a think about the last time you had to set up a new payee in your online banking).
Here are our favourite online payment services:
This is a fab solution that enables you to set up direct debit mandates with your customers.
But here’s the beauty of it – you can set it to only collect payment from your customer when it sees an invoice due for payment in Xero.
So if there’s no invoice it can’t collect payment, and it can only collect the amount due on the invoice.
GoCardless also marks the invoice as paid in Xero, and adds the payment to your GoCardless account within Xero, so saves a heap of time on your bookkeeping too.
GoCardless now has a new integration with Xero to collect Instant BankPayments. Check out all the details here.
Stripe is a great way to get customers to pay by card when you send them an invoice. They don’t have to enter their bank details, just their card details.
And if they have these card details saved securely in GooglePay or ApplePay, then it’s even quicker for them!
Stripe also links to Xero, so when customers pay, it tells Xero that the invoice is paid, and pays the funds into a Stripe account within Xero.
When the funds are paid out to you, Stripe automatically creates the bank transaction in Xero! Boom! Faster payments, and you get your time back!
Find out more about Stripe for invoice payments here
It is also a great solution for collecting e-commerce payments.
IWOCAPay is our current top favourite way to receive payment, especially for customers with bigger invoices, or who may be struggling to pay.
In essence, you’re giving your customers 3 months to pay, a bit like Klarna.
But the beauty of IWOCAPay is that you get full payment immediately. The good people at IWOCAPay also manage the repayments with your customer.
You can send a tailored link to pay, with the amount and invoice reference, or a link for your customers to add their own amount.
You can even link it to your online invoicing software, so your customers can pay directly via IWOCAPay.
Now you have some top tips on getting paid faster, I challenge you to change just one thing from my suggestions above.
We’re here to help you, so if you’d like a chat to help you improve your profits and cash, all you need to do is complete our Get To Know You Form.