Non-payment or long drawn payment of your invoices is ultimately going to kill your business faster than homicide.
Unpaid invoices are a big headache for businesses across the globe. According to the CISM, 27% of payments are paid late in the UK, and the EXIM reports 60% of payments are delayed in the USA. Well, things are even worse when it comes to India. In a survey conducted by Atradius, an insurance firm said that 94.7% of the respondents reported a delay in payments.
The small and medium businesses are the most affected by a delay in the payment of invoices. Infact, late payments are a huge blow to the employees’ morale. It creates a domino effect - employees’ salaries are credited late; if the payment due is substantial, the company might eventually cut down the number of employees to cover for the loss. Most small businesses experience a shutdown due to continuous delays in payments, says experts at cedars business services.
If you want to get your invoice on time, make sure you follow these steps:
Establish a systematic payment process
It is very important to set up a quick and easy payment process that allows your customers to receive timely reminders before the due date. For example - the system can send an email to the customer, say, on a weekly basis, reminding them about the due date and the payment details. This technique can prove to be an asset for the organization, stating clear instructions and timely reminders to your customers. It will also eliminate the hassle of reminding them of the details personally.
Conduct a thorough credit research
They say that you can learn a lot about a man from his history. It’s the same with businesses. When accepting a project from a client, make sure that you look into their credit details and payment histories. It would be great if you can get feedback from companies they have formerly been associated with.
Once you are through with the research, you will have a clear idea about their credit potential and behaviour. Repeat this process every time you onboard a new client and proceed with the ones whose records show that they are trustworthy. This is the best practice that we also perform at our
You can also employ third-party agencies like cedars business services to perform these checks and generate a detailed report that will include more intricate details like – Identification verification, bankruptcies, credit inquires and criminal records.
Get your documents right!
Establish an efficient managing system for documents when collecting invoices or other notices related to payments or conditions. Every invoice must pronounce the details clearly - conditions, amount and due date. It’ll be beneficial for you to get your invoices reviewed by lawyers before sending them out. If they suggest any changes, make them and get the document checked again. This will ensure there is no mistake on your part.
Incentivize your customers
Appreciate timely payments and provide incentives if you receive the payment before the due date. It will help you if you build add a personal touch to your relationship with the customers. For example - you can allow a certain amount of discount on the total payment to your customer if they make the payment before the deadline.
Send the invoice as soon as the work is done
If you want to get paid on time, it is important that you send the bill as soon as possible. The quickest way to send an invoice is by using an online solution.
According to Finextra, studies have proven that using online solutions over manual invoicing can save you up to 9.5%. You can develop a personalized online invoicing system or use existing software like Xero.
Charge for late payments
Despite doing everything you can to motivate your clients for paying on time, some might refuse to do so. Thus, it’s wise to prepare a contingency plan for such a situation.
You need to charge a substantial amount of late payment fees. Mention the details about the charges clearly in your invoice and other documents that relate to the business deal.
Make your invoice easy to pay
Try to provide as many payment options to your customers as you can - net banking, cash, cheque, cards, etc. This will ensure that the customer can make the payment in a form that is convenient for them. This ultimately increases your chances of getting paid on time.
Receiving payments on time is a big part of running your business smoothly. A slight delay in this process can cost you an arm and a leg. Take help from financial firms like cedars business service to make sure your clients pay you on time. Until then, follow these steps in order to ensure that your invoices are paid on time.