Last editedJun 20222 min read
Expediency is crucial in modern business, particularly when it comes to payment. When clients pay their invoices in a timely manner, it not only helps with your cash flow but saves you money in the long run too, as managing debtors and chasing up invoices steals precious time and resources from even the most experienced businesses.
Generally speaking, when an invoice is sent, the recipient legally has 30 days to pay it before further action is taken, though the terms might vary depending on the nature of your business. That 30-day timeframe is how most businesses operate and plan their finances so if multiple clients are missing that 30-day deadline, it can lead you into financial trouble.
However, with the right tools and the right mindset, it’s possible to not only get your invoices paid faster but even days or weeks before the deadline.
Shorter payment terms
From the outset, ensure your payment terms are clear with a written contract outlining the final sum and when it’s due, as well as your bank details and other potential payment options. Payment terms should also be short and realistic. Giving your clients 30 days to pay might seem like the right move as it’s a recognised standard. However, set the terms at 14 days and you are more likely to be paid on time. You might also put off certain clients, but they’re probably not going to be particularly desirable clients anyway.
Get your invoice out ASAP
Get into the habit of sending out your invoice either at the start or the end of every month. A delay in getting out your invoice also means a delay in getting it paid. Invoicing software helps as it can be set to compile and send out invoices to clients automatically. If you’re using electronic invoicing software, always set a ‘read’ receipt so you know when a client has received and read your invoice.
Send it to the right people
While it might be the case with smaller businesses, the person who pays the invoice might not necessarily be the business owner or the person you communicate with. Ensure your invoice is sent to the accounting department and CC your regular contacts. The more people you send the invoice to, the more likely it is to be paid quickly.
Get your invoice right
An incorrect or incomplete invoice leads to questions that take time to answer and sort out before payment is made. So, ensure your invoice is accurate and easy to understand. Accountancy software can also help here, as it will use bespoke algorithms to tailor your invoice for each client.
Don’t be afraid to follow up
We appreciate that following up on an unpaid invoice isn’t the most pleasant job and can feel like necessary work, but sometimes it’s the only way to ensure prompt payment. Start with gentle emails before gradually ramping up to phone calls, and try to remain cordial and professional. Accountancy software can be used to automate the follow-up process, but some clients might need the personal touch.
Add overdue fees
While it could put off some clients, adding an overdue fee to your invoice should actively discourage clients from late payments. Another option is to insist on payment up front or partial payment up front, but whether or not this is practical will depend on the specifics of your business.
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 handles. It allows businesses to collect invoice payments directly from client bank accounts via direct debit, giving them a greater degree of control.
The ease of payment offered by GoCardless also incentivises faster invoice payment. In fact,A business can get paid up to twice as fast by accepting GoCardless payments on their online invoices.