Every business owner wants to get paid faster. This is especially true for contract and invoice-based small businesses, many of which wait around 30 days on average to receive payment for their service. So, what can you do to get paid faster?
Here are three tips that will get your customers to pay faster, meaning more money in your business bank account and less hassle juggling your cash flow.
1. Offer an online payment option
One of the biggest barriers to quick invoice payment is actually psychological. In the past, when a client received an invoice, they had to find their checkbook, get an envelope, track down a stamp, address the envelope and then drop the envelope in the mail. Although that process really is not that difficult, it seems like a hassle. As a result invoices are often left unattended until a payment deadline or penalty serves as an incentive to pay.
However, new online invoicing options remove that barrier. All clients have to do is input their payment info and click a button to pay. It is extremely easy. Some invoicing services, including GoDaddy Online Bookkeeping, even have time-tracking options, so you can track your time spent on specific jobs and automatically have that info imported into a client’s invoice. In other words, online invoicing will save both you and your client time and money.
In fact, a recent study by Billentis Research found that the typical seller can save up to 80 percent on invoicing costs with the implementation of an e-based or automatic invoicing system, when compared to a paper one. But more importantly, the convenience and removal of the psychological barrier to payment (not to mention the time traditional invoices spend in the mail) means quicker payment for your business.
2. Get your invoices out as fast as possible
According to FreeAgent.com, invoices that were sent out within a week of job completion were normally paid in fewer than five days. But if the invoice was sent out a week later, then it took 10 days or more for businesses to get paid. Surprisingly, more than 50 percent of the businesses FreeAgent.com studied did not send invoices until a month or more after job completion.
You set the example for your client. A late invoice from you will most likely mean a late invoice payment from your client. Try to get invoices out within two to three business days of job completion. Have a formal invoicing system in place so that invoices do not get bogged down on your end. The quicker you get your invoices sent out, the quicker you will get paid.
3. Offer early-payoff incentives
Everybody likes a deal. That’s why you should consider adding early-payoff incentives to your invoices. Give clients a good reason to pay off their invoices quickly. If you offer a 3-percent to 5-percent discount for invoices that are paid within the first five days, customers will respond.
If you have a $5,000 invoice, you may take a $150 to $250 hit if you offer a discount. But that’s $4,750 or more you have in the bank to re-invest in your business. Also, the quicker the payment, the less time you have to waste stressing about getting paid (and tracking down payment), which I know from personal experience is a day-to-day reality for a lot of small business owners.
Stress less about cash flow
There is no surefire way to get paid within five days. So, if you need the money right away, you can also consider invoice factoring services, which provide advance payments on outstanding invoices.
But if you follow these tips, you likely will be surprised by how your clients will respond. Getting paid quickly will be the norm instead of an aberration, meaning more money in your business account and less stress about your cash-flow situation.