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Invoicing customers and waiting to get paid is a problem for all businesses, with late payments causing big cash-flow problems. In this post, we’ll outline some ways to help you reduce your DSO (days sales outstanding) and ensure you get paid faster.
Get paid faster by setting out clear payment terms
One key way to make sure customers pay you on time is to set out clear payment terms from the outset. Many small business owners fail to include a due date or any other kinds of terms. You don’t have to wait until you invoice a customer to introduce terms. In fact, it’s recommended that you spell them out earlier – either on your contract or on your proposal. You don’t have to set your terms at 30 days either, you can ask for whichever payment terms work best for you.
One way to get paid faster is to include payment terms that demand a portion of your fee up front. Rather than wait for full payment weeks after the work’s complete, it’s perfectly reasonable to ask for 30%, or even 50% of the final fee before work begins. Many customers will expect you to ask for this. If you’re a small business, it’s your guarantee that they’re fully committed to the project and offers them the security that you’re serious about undertaking the work.
Get paid online fast
These days you can skip the paperwork and use one of the many online payment systems available. GoCardless, for example, can reduce the time it takes to get paid by up to 47%. By using a provider like GoCardless, your DSO (days sales outstanding) could be drastically reduced, and you could even get paid up to 3 days faster or more, with an average reduction in DSO from 4.5 to 2.4 days.
Get paid faster by using bank debit
Bank debit is a pull-based payment method that allows you to control when payments are collected. GoCardless allows customers to successfully collect around 97% of their payments first time. Plus, if a payment fails, you can take instantaneous action to recover the payment. Success+ is a GoCardless feature that makes intelligent retries, and it successfully recovers up to 76% of failed payments.
Get paid up to 3 days faster
Don’t be slow to send out your invoices. If you don’t send out your invoices promptly, for example sending them out 3 days late, you’ll add at least 3 days to the date you get paid. By invoicing immediately after the work is completed you’ll ensure there will be a smaller time lag between the services you’ve provided and your payment
Use incentives to get paid up to 4 days faster
Giving customers an incentive to pay you early could see you get paid days before your due date. The kinds of incentives you could offer include a discount off their next bill, or an extra free item. If you can find the right type of ways to motivate your customers you should be able to get paid faster.
Send out clear reminders to get paid faster
When you’re setting your payment terms, make sure customers know what will happen if they don’t pay on time. Once you’ve sent out your invoice (on time) send out reminders to let customers know that the payment is due soon.
If you do all the above and customer still aren’t paying you on time, then draw the line. There’s no reason to carry on doing business with these types of client.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.