Are your invoices stuck in limbo, preventing you from moving forward with your business? Registered chartered accounting firm Drumm Nevatt & Associates are sharing their tips and tricks for setting the right invoice terms to ensure your invoices are paid on time
Cash flow is the lifeblood of any business, especially small businesses. “Ensuring that you will be paid on time is key in maintaining a healthy cash flow, and is how a business survives and grows,” says Craig Nevatt, Director at DNA.
It is important to remember that your invoice payment terms can set the tone for the whole transaction with your client or customer. Improve your chances of speedy payment by invoicing swiftly, communicating clearly, and prompting clients when they owe you.
Obtaining all the essential information about the job is key to create detailed invoices. These are details like business information, the amount owed and payment information. Also consider if there are any other details that your customers might want to be included on their invoice such as expenses. Predicting these requests can go a long way in cutting down the time it takes for your customers to pay their invoices.
The most important payment term is the due date. Traditionally businesses used to always give 30 days, but this is a legacy from the old days of mail and payment by cheque. Now there is no reason to wait that long, as most payments are now electronic.
“If you work hard and meet your clients' deadlines, there's no reason why you shouldn’t be paid within a week,” adds Craig.
According to a study done by Xero, close to 75% of invoices ask for payment within 2 weeks, so beliefs are changing.
Never put invoicing off, all you are doing is pushing back your payday. Instead, look for ways to speed up the process by using templates and sending online invoices.
Don’t wait until an invoice is way overdue before reminding a client, they owe you. Set up an automated process that sends the client a friendly email as the due date approaches. Keep following up past the due date if the invoice remains outstanding.
The same Xero study discovered that in the first 25 days after payment is due, overdue invoices with prompts get paid an average of four days quicker than those without.
If clients don’t respond to emails or messages, this is when you need to pick up the phone. This is obviously not the nicest part of being a business owner, but it will help you stay in business.
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