Handling invoices is a huge part of keeping a business running smoothly. As invoices add up and clients miss payments, it can become more and more difficult to manage your invoices. To make this entire process simpler and easier for both you and your clients, here are some practical tips for managing your clients’ invoices properly. These handy tips will help you keep your business on track and get your invoices paid!
1. Set Clear Payment Terms
Each invoice distributed to your clients should have simple terms written on it. And as a business owner, ensure to follow through with these deadlines. To facilitate, set up a system of reminders on given days. For example, if your invoice terms require payment within 45 days, set up a reminder invoice to automatically go out after 30 days and the last reminder two days prior. If the 45 days are surpassed, then you should follow up with reminders and a final notice to encourage your clients to pay the bill as quickly as possible.
2. Offer Simple Payment Methods
If paying your invoice is difficult, it can act as a barrier to you getting your payment. To ensure you receive your payment, make it simple for your clients to pay by offering multiple payment methods like electronic payments, automatic bank transfers, cheques, post-dated cheques, or money orders. The more options your clients have, the more likely they will pay the invoice on time.
3. Contact the Right Person
Your invoice should go to the Accounts Payable department at your client’s business. You should take the time to contact the company beforehand to find out who the right contact person is for invoicing. If there are any issues, you will have a direct line of contact with the right person. Contacting the wrong person in a company could end up in delays in getting your invoice paid.
4. Consider Invoice Factoring
If you have clients who are very slow to pay, this can present a cash flow problem for your business. To continue running, you’ll need the money your clients owe you. If this will not come in soon, you might hire an outside company for invoice factoring. Invoice factoring is when another party takes over your clients’ invoices and gets up to 90% of the funds your client owes you. This is basically a cash advance, known as invoice financing, that can be paid back when the client eventually pays your invoice. The factoring company will charge a fee as well, which is usually a small percentage of the invoice. This can get the cash in your hands so you can continue to operate your own business while you wait for your clients to pay you.
5. Offer Early Payment Incentives
A great way to encourage your clients to pay on time or even before the deadline is to offer them an exclusive discount. This could be a 5% discount off the total price if they pay the invoice within 30 days instead of the agreed-upon 45 days. This incentive can encourage slow payers to speed up the process to save cash on their end. You will get paid sooner, and your clients will be happy.
6. Request Advance Payments
If you have a client who is notoriously slow to pay, try to get them to pay for their products or services in advance. Before you render the product or service, the client will have to pay the total invoice to protect you from ending up with restricted cash flow. If your client is not up for this idea, then you may also consider asking them for a percentage of the invoice total as a deposit first.
7. Use an Automated Invoicing System
In today’s digital era, this is a given. Despite that, many companies use basic software to create invoices but don’t have software to follow up on payments. It is well worth it for your business to invest in invoicing software that will send you notices whenever an invoice is approaching the due date, when an invoice is late, and when a client is in default. If you send out tons of invoices (Yay!), you can easily lose track if you are keeping score manually. A digital tracking system will make it simpler for you to keep up and prevent human error. You’ll never miss an unpaid invoice again!
8. Build Strong Client Relationships
The best way to ensure your clients pay you [right after sending an invoice] and respect your terms is to keep an amicable and open-ended relationship with them. Reach out to your clients regularly to ensure they are happy with the product or service they have purchased from you. Building strong, lasting relationships with your clients will help encourage your clients to keep your company top of mind and pay their invoices on time. A friendly business relationship is ideal for both you and your clients.