Tips to get paid faster
Cash flow to a small business, is like blood flow to the heart. While you may consistently pump quality products and services to your customers, if the money stops, so too will your business.
Poor cash flow management is a silent killer that sees 40% of Australian businesses fail, so here are our top tips to keep your cash flowing.
Step One: Plan
With what has been labelled as the world’s worst payment culture, avoid being the 62% of Australian small businesses that face cash flow difficulties by knowing exactly who, what, where and when you’d like to get paid.
Set up your time frame
Short payment terms will result in quicker payment. Studies have shown the average invoice is paid two weeks late regardless of the terms outlined. So if your business expenses require monthly cash flow to operate, try requesting payment within 14 days to account for any potential overdue payments and avoid hindering operations. If your payments are recurring, why not suggest setting up a direct debit account which will enable them to automatically provide payment on an agreed date. Make invoicing a priority and set up calendar reminders after you complete projects because if you’re willing to wait a week to send your invoice, your payee won’t be too fussed to pay on time.
Keeping detailed records of the goods and services you’re providing will give you a clear view of who your money is coming from. This will help you chase up late payments and save time in searching for lost funds. Using online invoicing platforms such as Honcho, Xero or QuickBooks, allows you to constantly view your cash flow, send invoices and automatic reminders to customers, and track overdue invoices from any device.
Step Two: Charge
A plan of attack is great to set you up for the long run, but you can’t be paid if you aren’t charging so here are ways to ensure your charging process gets you paid faster.
Write the perfect invoice
Make sure your invoices have all the necessary information so your customers can pay you:
- Business Name: State your business or trading name and whom the payment is going to. Incorporating your business logo will help your invoice stand out.
- Australian Business Number (ABN): Not including an ABN on your invoices could mean 49% of any payment made to you can be withheld by the Australian Tax Office. Register your ABN here.
- Contact Details: Make sure your most up to date phone, address and email are listed to avoid time consuming searching.
- Issue and due date: Include the date you’ve issued the invoice and the date when you expect the invoice to be paid based on any terms you’ve agreed on.
- Payment details: Clearly state your payment details and provide multiple options. For example, receive payment via credit card with Honcho Pay, while bank transfers will need your BSB, account number and name.
- Cost information: List out the description of the work you’ve done, items and services provided and the quantity of each for your client to recall what they’re paying for. Make sure the correct sum total at the end if you’ve listed multiple charges.
- Personal touch: If you are mailing invoices, you could stand out in a pile of white A4 paper with coloured or textured paper.
Digitalise your payment options
Accounting research shows that electronic payments are typically made eight days faster than traditional methods. Accepting credit and debit cards through payment gateways like Honcho Pay will help speed up your payment.
Incentives and penalties
Adding incentives and penalties could help speed up the payment process. If customers know they’ll receive a 10% discount for payment within 10 days, or a 10% penalty for being late, they’re more likely to chase it up straight away.
Step Three: Communicate
It goes without saying, in every relationship communication is key. Having open, positive lines with your customers will benefit you financially in the long run.
Answer the important questions
There’s nothing worse than confusion during the middle of a project. Clarity with your customer from the beginning will ensure you’re both clear on what’s being done and costs involved. Consider the expenses any possible additional expenses that may come up. Outline and itemise everything so your customer won’t waste time confused over your charges when it comes time to paying you. It’s also a good idea to negotiate your payment terms and conditions with your client. They may pay every 30 days but if that doesn’t suit your personal requirements, then compromising earlier beats arguing about it later.
A friendly face and bright white smile will resonate far more than a dull piece of paper. Studies show saying please and thank you on your invoice increase your chances of quick payment by more than 5%. Why not include a handwritten note to your customers so they know they’re personally valued.
Persistence beats resistance, and in the case of getting paid quicker, forgetfulness. Sending periodic reminders in the days leading to your invoice due date can help keep your customer on track with their payments. Work out which medium works for you, but phone calls, automated emails and even a friendly face-to-face coffee will keep you top of mind.
Check out Honcho to create and send unlimited invoices as well as receive automated reminders and track your payments!