You need to collect money from clients every month, but not all of your clients pay on time. This is, unfortunately, a common problem in business. You’d think that other businesses would recognise the importance of paying in a timely manner. They are, after all, business people. But, first and foremost, they are people, and they often carry with them the same kinds of financial issues that affect their personal life.
So, if you’re working with a business owner or independent contractor that is terrible, or even lazy, about managing his or her own money, you’re going to have problems collecting payment. Here’s how to make it easier on them, and all of your clients.
Make Invoices Easy To Read
Sometimes, clients are lazy, they’re just busy. And, if your invoice is difficult to understand or read, they will resist paying it because they don’t understand the charges. Make it dead simple for even a lowly mail clerk to understand what you’re charging for. You’ll get a nice bump in your accounts receivables this month if you do.
Use An Invoice Template
Using a template speeds up the invoicing process, and it also makes everything uniform across all clients. In other words, your HR staff, specifically those dealing with accounts receivables, will be able to speed through the invoice creation process, check for and minimise errors, and answer client questions more efficiently since everything is a uniform template.
But, where do you start? How to you get good templates? You could try creating your own, but these templates are already done for you and you can customise them, branding them with your business logo. Just search for the one you need, and download it. Problem solved.
Send Invoices According To Client’s Preferred Method Of Communication
Some clients don’t like to receive invoices via email. They may not have secure email connections, or they may not be set up to file documents like this very efficiently. Sometimes, some industries have regulatory requirements that prevent them from having a digital-only copy of paperwork.
So, rather than assume or guess at what your client wants, ask him. The company will probably have a preferred method of communication. And, when you send invoices according to their preferred mode of communication, you decrease the payment cycle – you get your money more quickly.
Include A Return Envelope
Include an envelope when you send paper invoicing. Why? Because you can insert flyers or other advertisements in with the bill. This is a strategy that some utility companies do, and it works. Cross-sell, and upsells, are common in invoicing.
They’re already buying something from you, and you’re already sending something out to them. Why not send something along with the invoice and cut your mailing costs?
Include All Information Necessary To Make Payment
Don’t forget to include all relevant payment information in with the invoice. It might sound a little silly, but lack of payment instructions is a major reason why invoices don’t get paid on time. You can’t control the payroll of your clients. They may have just hired someone new to pay the bills.
And, even if they didn’t, your clients may need a little guidance on the different payment options you offer, when payment is due, the consequences for not paying on time, and where to send payment.
Remember, the easier you make it for the client, the faster your accounts receivable will get the payment.
Use Paper Invoicing To Collect Payment or Remind Clients They Haven’t Paid Their Bill
Collection has a bad reputation, but the fact is that some clients are chronic late-pays. What do you do about it? If you’re sending digital invoices, you can always followup with a paper invoice as a sort of “collection letter,” reminding them that they only have a week or several days to make payment in full.
This way, you’re not coming off as threatening. You’re simply reminding them that payment is due. You could even use red lettering to remind them of the importance of paying.
Reward Clients For Paying Early Or On-Time
One method for getting clients to pay on time is to offer a reward for doing so. Early payment discounts, for example, will get your invoices paid sooner rather than later. It’s a simple strategy, but one that works.
Have A Backup Vendor
Have a backup vendor who can send your invoices out if your primary option fails or cannot do it in the timeframe you specify in any given month. Usually, mail-houses are pretty reliable, but every business is subject to hiccups.
Use a Backup Factoring Company You Trust
As a last resort, have a factoring company that you can turn to. Factoring companies allow you to sell unpaid invoices for less than the full amount. The factor takes over the collections action, and you get your money. Why do this? If your client isn’t paying the bill, and it’s been over 3 months, it’s clear that extensive collection action will be required. Why bother with it?
You’re not a collection agency. Get at least something, and move on.
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