5 tips on how to get paid quickly in your small business

Kirsty Young Advice and Tips

  • Struggling to get invoices paid on time?
  • Cash flow suffering as a result?

You are not alone. Late payments are a problem for many small businesses in the UK. A recent Federation of Small Business (FSB) study showed the average amount of days a small business has to wait to get paid is around 43, with an average of over £23,000 owed at any given time.

That’s a lot of cash! With that in mind, here are some practical steps that you can take yourself to help your business get paid faster.

Reasons for slow payment

It’s all too easy to presume late payment is deliberate, but from our experience, in the vast majority of the cases it’s for simple reasons like:

  • They didn’t receive the invoice
  • There is a query with the invoice, and they haven’t spoken to you
  • They simple forgot it was due / don’t have a decent system to track payments due
  • They were going to pay but didn’t give it any priority
  • They went to pay it, but couldn’t find the bank details or an easy way to pay

There are many more, but the list above is possible to impact through your own actions as an owner. So here are our top 5 tips for getting paid on time:

 

1 Invoice promptly, and regularly

Sounds obvious, but in our experience many small business owners really struggle with invoicing. They are so busy doing the work they struggle to prioritise time in the diary to invoice for it.

A simple solution is to use accounting or payments software where you can easily produce an invoice. Apps such as Xero or QuickBooks have this feature build in. So you can create professional looking invoice in seconds, and email straight to your customer or client. This is particularly useful if you are out on the road a lot, and you’d be surprised how many people might actually want to pay you right there and then!

Action points:

– Review your invoicing system

– Set time aside in the diary to invoice regularly

– Investigate invoicing apps for your phone or mobile tech

 

2 Invoice clearly

Your clients need to see what they are being invoiced for. Provide clear invoices with enough detail so they do not result in confusion or queries from your clients or customer. This will help you get paid on time.

If you have to provide a ‘purchase order number’ supplied from your customer, be sure to have it clearly marked.

Make your payment terms obvious. Generally, you will decide what your payments terms are, such as payment now, 14 days credit, 30 days credit (see tip 5 below!). On the odd occasion, the terms of engagement with a customer might dictate the payment terms, such as where you have tendered for the work.

Action points:

– Review your invoice template to ensure it’s clear

– Add payment terms

– Ensure any reference numbers from your customer/client are easily identifiable

 

3 Remind regularly

Many of your customer or clients are busy people. If a payment isn’t made on time, they may just have forgotten to pay you, plain and simple.

  • Reminding them in advance of when payments are due can help encourage prompt payment.
  • Reminding them asap if their invoice becomes overdue is critical.

Personalising reminders can go a long way to getting payment made. A small note, or personal email with a statement can have a bigger impact that a standard invoice reminder template. Depending on the size of your business that may present an operational challenge, but it can still be a powerful strategy if you have a few stubborn invoices unpaid.

To do this, you need to have a system where on any given day you can see who owes you money, and send statements accordingly. Shock horror, we are going to suggest an accounting app with Xero or QuickBooks can really help manage this.

If emails don’t cut it, you can try the old school method of posting invoices with a personal message attached. Research showed that if a handwritten Post-It note was stuck to the front of a survey cover letter, 75% of recipients filled it in, as opposed to 48% who got the cover letter with a note written on that. Sign the Post-It note with your name and the rate increases further. (1)

Action points:

– Review your invoicing system

– Identify clients or customers that owe you money, and send statements and reminders

– Schedule a diary date to do this regularly

 

4 Make it easy to get paid

You’ve invoiced promptly, clearly and reminded regularly – but what if your customer just can’t work out how to pay you!?

Removing friction from the actual payment process can really help with getting paid on time. Your invoices should have clear payment details on them (such as your bank details) and electronic links to a payment service (things like Stripe, GoCardless, iZettle). Make is easy – don’t assume every customer can pay electronically or with a credit card or even internet access. (2)

Giving multiple ways to pay can really help. Consider:

  • Bank
  • Card
  • Direct Debit
  • Mobile POS devices

Action points:

– Review your invoice template

– Check the customer or client clearly see how to pay you

– Review how easy it is to pay you via digital options

– Offer choice – how many ways do you offer customers/clients to pay you?

 

5 Review who you give credit to, and for how long

This one is a preventative tip, but you should review who you give credit to, and how long you are willing to give it for. Ask yourself:

  • Does every customer need 30 days grace to pay?
  • Why am I offering 30 days instead of 7 or 14 days, for example?
  • Can I get paid up front, either in full or partially?
  • Can I get paid on direct debit over a period?

If you are concerned on the impact of offering little or no credit terms, think about any dealings you’ve had with other businesses. Not every business will even entertain credit with a new customer or client, unless they can prove certain financials, track record or credit score.

Action points:

– Consider your payment terms

– Review who you offer credit to, and for how long

 

Summary

If you can action these five points alone, you will almost certainly increase the likely of getting paid on time. Good luck!

Can my accountant or bookkeeper do my invoicing?

Well, they can, but it’s usually more time-efficient and cost-effective for you to do it yourself. However, if you’re struggling to set up an invoicing system, or are drowning in paperwork, we can help with tailored advice and accountancy service including bookkeeping.

Contact us to make an appointment.

 

 

 

 

SOURCES:

(1) Garner, R (2005) ‘Post It Note persuasion: a sticky influence’, Journal of Consumer Psychology, 15: 230-37

(2) Particularly true for businesses providing services to seniors and those in more remote areas. According to Ofcom, 6% of UK households do not have internet access.