2 min read
Overdue invoices not only impact your cash flow, but they also eat into your valuable time. Do you spend hours each month sending chasing for payment emails? If so, you’re not alone. UK small and medium enterprises are paid an average of 18 days late, with 1 in 6 invoices remaining unpaid after 90 days. When invoices aren’t paid on time, you can run into financial difficulties of your own.
You want to focus on providing great services for your customers, not chasing overdue invoices. Here’s how to break the cycle of chasing for payment.
How chasing for payment hurts your business
Before you sit down to write your next chasing letter for late payment, consider the toll it takes on your business. You need to get paid, but continually contacting your customers about money makes your relationship purely transactional. The best business-client relationships are about more than money; they foster a sense of trust and satisfaction. Furthermore, sending repeated payment reminders makes you seem pushy and even desperate for cash. Though it may not seem fair, this can be a turnoff to customers who may wonder if your business is struggling financially. From your end, dealing with late payers breeds its own resentment.
Chasing clients for payment is a waste of your valuable time and resources that could be spent on more productive tasks. It might not take you much time to write a single chasing for payment email, but these quickly add up over time particularly if you need to send several to each client.
How to chase customers for payment more effectively
Despite anyone’s best efforts, invoices sometimes go unpaid. Perhaps the best way to streamline the payment collections process is by using accounting and invoicing software like Xero and QuickBooks. These let you automate the process to significantly cut down on admin. Online invoicing tools let you schedule automatic reminders and follow-up emails, which are then sent by the system. This also takes the human element out of chasing payment, reducing potential negativity or breakdown in your customer relationships.
Put a stop to chasing for payment
Of course, the best way to avoid the situation is to stop chasing payments entirely. So, how can you accomplish this? Automated software helps because it issues invoices in a timely manner and makes it easy for customers to pay with a single click. Here are a few additional ways to prevent overdue invoices:
1. Request upfront payment.
This is standard practice for freelancers and certain industries. Write up a contract for each new client outlining the services they can expect to receive as well as a breakdown of all charges. You can then either ask for full payment upfront, or a deposit of the total bill. This makes expectations abundantly clear and reduces any disputes that could lead to future payment delays.
2. Send small, frequent invoices.
If you’re working with a regular client, don’t send a large bill at the conclusion of the project. Instead, invoice at small, regular intervals. Send invoices as soon as work is complete so that your services are fresh in the client’s mind. For ongoing clients, you could even set up a regular monthly billing schedule to encourage timely payments.
3. Make it easy to pay.
Eliminate as many barriers as possible to collecting payments. It’s good to accept a variety of different payment methods, catering to your client’s preferences. You should sign up with a payment processor that enables click-to-pay links embedded directly in your emails and invoices. This allows customers to pay as soon as the invoice is received without tracking down your bank details.
How to take charge of payment collection
With a combination of automated invoicing and payment collection, you’ll be able to eliminate the tiresome task of chasing late payment. Use today’s technology to take charge of your payments process, letting the system perform the work on your behalf.
GoCardless helps you take control over payment collection. Your business can collect invoice payments directly from customer bank accounts with full permission on the agreed-upon date. Take recurring payments using Direct Debit, or one-off payments with our Instant Bank Pay solution powered with open banking. This eliminates the hassle of late payments along with any awkward conversations.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.