9 Tips to Getting Paid on Time
When you work for clients you expect to be paid for the work you do. However many small businesses really struggle to get paid on time, if at all and sometimes even invoices are missed. It is so important to make sure you are clear about your payment terms and you have a system in place for your invoicing so that your clients will be clear on how they pay you and when.
Here we set out a simple guide to making sure you do everything you can to get paid on time.
1. Invoice on time. Invoice when you have done the work and it is fresh in mind, not six months later because you forgot or feel bad. Your client is more likely to pay you on time if they remember the good service and work you did for them and they are much more likely to forget that several weeks later.
2. Find out who pays the invoices. There is no point sending your invoices to your marketing contact as they are unlikely to be the person paying your invoice, so get a name, make contact so they know who you are and make sure your invoice gets into their inbox. In some instances if you send your invoice to the wrong person it may not even ever reach the person who makes the invoice payments and could well be missed.
3. Find out when your client runs their payments. Once you’ve made contact to establish they know who you are (if it is separate from who you are working directly for), find out what day they make their invoice payments. It will make you seem efficient and also ensure that your invoice reaches them when they are doing all their payments and you’ll be top of the list. No one wants to scroll through their emails to look for outstanding invoices. Remember not everyone will have a great payment system and your invoice could easily slip through the net so if you know the day they usually do payment runs you can at least remind them on or just before this day.
4. Be clear about your payment terms and owhat your expectations are. Be prepared to introduce a statutory interest charge if you wish to and let clients know about it as part of your terms.
5. Use a cloud accounting software to raise your invoices. Invoices prepared on Excel and Word can easily contain mistakes and not be filed correctly. An online bookkeeping software will give you the ability to create an invoice, fully branded, so that you can send a digital invoice as well as by ordinary email or post if you wish, and will automatically keep a record of the invoices you have raised. Using a systemised program like this will enable you to keep track of all your invoices and see who owes you money at any point in time and whether overdue, and most accounting softwares will allow you to run what is called a debtor report which will give you this information. This should be one of the most fundamental parts of running your business. We recommend QuickBooks and Xero as our favourite bookkeeping softwares. We had a client who was not paid £4,000 worth of invoices and didn’t notice it until we did the year-end accounts as they had no system or record keeping in place. Using an online software will allow you to send reminders with just one hit of a button you. You can even set up an automated email follow-up process saving you time and missed payments.
6. Make it easy for a client to pay you. For example when you send an invoice let there be an opportunity to click through and make a payment online. No one wants to take out the cheque-book anymore and logging into the bank to make a payment can also be a pain. It may cost you a small percentage of the invoice but it is worth every penny and will ensure you get paid quicker. Examples would be PayPal or Stripe.
7. Use a dedicated resource to chase your invoices, ie a credit controller. It is the one thing that many business owners put off when doing themselves! Delegating this is key. Whether this is someone in-house or something you outsource to a specific person or team for a few hours per week, having someone who is dedicated to chase and follow-up your invoices will allow a more systemised approach, rather than you sporadically chasing as and when you remember or when you have the time to do so. They can then be consistent with their approach, keep notes on the clients response and record dates on which the client has agreed that they can follow up when promised to pay. It will introduce accountability to the client when they are make a commitment to payment.
8. Consider changing your payment facility, such as setting up a direct debit or standing order arrangement for regular payments, or a direct debit mandate to collect payment of invoices on their due date. Use something like GoCardless for this, who we partner with and thoroughly recommend.
9. If you have a consistent late payer, consider requesting payment upfront for future work. There is nothing more frustrating than continuing to work for someone who does not pay you on time or respect your terms. Remember it is your choice to work for a client and if a client is consistently late in paying and costing you time and energy you may want to consider whether you continue working for them as a bad client can be so detrimental to your business.
We recommend that you put the time aside to build a system and make sure it works for you. So many times I’ve seen people who have no system in place and therefore fail to get paid on time .
If you like to find out more about how to improve your payment systems we will be running a workshops on this, so click here to book online.
FUSE is an independent Chartered Certified firm of accountants and tax advisors based in Highgate Village, North London. We provide a dynamic range of services to clients working in property, media, entertainment and professional services. Our clients vary in size from self employed sole traders, small enterprises and medium size businesses. We believe that comprehensive financial planning and sound business financial advice are the keys to growth and profitability.