Many small businesses struggle to get paid on time – and a late payer can make the difference between positive and negative cashflow.
So if you’ve ever been left sat around waiting for the cheque to arrive, here are 10 tips to help you get the money in sooner.
1. Invoice quickly. Make sure you invoice as soon as the work is completed – not at a set time during the month. The sooner you invoice, the sooner you’ll get paid.
2. Invoice in advance. This is particularly important if you’re dealing with a new customer. Don’t be afraid to ask for a deposit or even full payment in advance. It doesn’t mean you don’t trust them, it’s just good business sense.
3. Ask for stage payments. If you’re working on a project that’s going to take a few weeks or months, negotiate stage payments from your customer. You’ll be spending money out to fulfil the order and you’ll need money coming in to pay for this.
Most customers will understand if you explain this to them.
4. Get it right. Make sure everything on the invoice is accurate and clearly annotated – itemise any work done if necessary. Weeks can be added to the time it takes to get paid if you don’t adhere to this simple rule.
5. Put it in writing. Make sure you put your payment terms clearly in writing. If your customer doesn’t know when you expect to be paid, then how can you expect to receive payment on time?
Put your payment terms on all documentation – including the invoice and statements.
6. Build relationships. Get to know the people in charge of paying your invoice. If they know and like you they’re much more likely to make sure your invoice is paid on time.
7. Systems, systems, systems. Have a properly documented and adhered to credit control system. Make sure all your team know the role they have to play in getting the money in for you.
8. Use the phone. Don’t be afraid to pick up the phone to chase payment. If you don’t ask, you don’t get.
9. Use humour. I’ve seen a great example of a credit control system which included a letter from ‘John’s computer’. This letter said that so far only the computer and the customer were aware that payment was overdue – and if the customer paid quickly then John need never know!
If you’d like a copy of this letter – just email me at [email protected]
10. Get tough. If your customer is avoiding paying without a valid reason, then they may be having cashflow problems. This may be the time to get tough as you don’t want to be the one left without the money in your bank account.
If you’ve complied with your side of the contract, then you have a legal right to be paid. The threat of legal action can often be enough to ensure the customer pays you but be prepared to follow the threat through if it’s a large amount.
Worried about upsetting the customer? If it’s got this far, then I’d suggest that it’s not a customer you want to deal with going forward.
I’ve seen these rules literally transform the cashflow of a small business.
So look carefully and decide which ones you’re going to implement in your business.
For any other help or guidance, email me at [email protected]