Getting paid can be a big worry when you run a small business. Here are 7 tips to prevent late payments, so that you can put your feet up at the end of the day.
Once you’ve sent an invoice to your client it might feel like all your work is done.
But you might have to follow up with the client—sometimes several times—to actually get the money into your bank account. Here’s how you can increase the chances of getting paid on time, and how you can make the follow-up process as easy as possible.
See also: Be the first to get paid
1. Invoice sooner rather than later
It goes without saying, but the faster you send out the invoice, the faster you can get paid. This is because the due date is calculated from the day the invoice was created: If you have net 14 day payment terms and you invoice on January 1st, the invoice should be due on January 14th.
It might be tempting to let your invoicing tasks pile up until the end of the month, but it’s much better to set aside a bit of time every week—maybe even every day if you have a lot of clients—to do your invoicing. It’ll make it easier to remember the details of the sale too.
You can even use a free invoice app to send invoices on the go!
2. Send correct and complete invoices
There are many ways to send an invoice. If you use invoice software, you ensure that your invoices include everything you need to get paid on time.
That’s because invoice software helps you by
- adding your details and logo automatically
- adding your preferred payment method automatically
- letting you search through your existing clients or add a new client easily
- letting you search through your existing products and services, or add new ones easily
- showing you an error message if you’ve forgotten any required information
Best of all, it’s completely free to use.
See also: Why invoice software is better than invoice templates
3. Set clear payment terms
In your contracts and in your invoices, you should make it clear to the client what your payment terms are. This includes:
- When the payment deadline is
- How they can pay you, for example via bank account transfer
- What happens if they don’t pay by the due date, for example that you’ll add late payment fees
- Your returns and warranty policy
If you make all this clear to the client, your chances of getting paid on time will increase.
See also: What are payment terms?
4. Send the invoice to the right person
If you’re invoicing a large company, make sure to get the name and contact information of the person you should send the invoice to. If you send it via others, you risk it not being delivered on time—or delivered at all.
Having the right contact information, also makes it easier to follow up on the invoice if it hasn’t been paid by the due date.
5. Set shorter payment terms
You might think that net 30 payment terms are the norm, meaning that the invoice is due 30 days after it was issued. However, many businesses have much shorter payment terms than that.
This is mainly because invoices are now sent digitally rather than in the mail. They get to your client faster, and so they’re able to pay you faster too.
6. Reward clients who pay early
To avoid late payments, you can consider offering an incentive to clients who pay early, for example a small discount. You should clearly state this on your invoice, and also maybe drop the client an email to let them know. We all appreciate a discount, right?
Besides, it’ll improve your cash flow significantly, since you’ll have money coming into your business much quicker.
7. Follow up before the due date to avoid late payments
Emailing the client with a quick and polite follow up before the due date can help bump your invoice to the top of the pile, and ensure that your client remembers you.
Rather than being a nuisance, this can signal to the client that you run a serious business. Besides, it’ll let you catch and fix any potential issues early: Maybe the client has questions about the payment method, or they disagree with the invoice amount? If they have an easy way to reach out to you for questions, you can resolve the issue much sooner, and build better client relationships.
