Getting paid late by a customer can ruin your day. Getting paid late by a bunch of customers can shut your doors for good. Consistent cash flow is the lifeblood of the small business, so anything you can do to keep it steady is going to help.
To help you keep the lights on, here are five tips for getting your customers to pay your invoices when they’re supposed to. Spoiler alert – communication is the key.
1. Tell them when you expect to get paid
The number of bills I’ve seen from small businesses with no due date is shocking. As a general rule of thumb, people won’t pay until they have to pay. If you don’t tell them when to pay, they’ll just wait until you bug them. Every bill you send out should have a due date printed in large font.
The more specific you can be the better. Instead of having your bill come due in “Two weeks,” put down “August 12, 2015.” The extra specificity makes it perfectly clear and makes it more likely to be added to a calendar.
2. Make it easy for people to pay
Thanks to modern technology, you no longer have to wait for your customers to get the bill in the mail, fill out the check, and send it back. Instead, you can drop a link in your emailed bill, and your customers can pay online. They won’t, though, unless you give them the option.
By adding a payment link in your digital bill, you can entice customers into making their payments easy and early. Many of the invoicing software options out there offer this functionality. For instance, Xero connects with PayPal and QuickBooks Payments offers its own processing.
3. Remind people that they need to pay
You’ve told them when to pay, you’ve told them how to pay, now tell them again. As the payment deadline approaches, send a reminder email to let them know that the deadline is coming up. Schedule the email when you send the invoice, so you’ll never miss a reminder.
Just like you would with your first invoice, make sure you set a clear deadline and give the customer an easy route to payment.
4. Have a penalty in place
You pay your credit card bill on time every month because you love meeting arbitrary deadlines, and it seems like a nice thing to do, right? No. Of course not. You pay on time because if you don’t they charge you $50 and send you another annoying letter and threaten your credit.
Don’t worry about seeming mean, your business depends on the cash you get paid. If someone thinks they’ll just let the date slide, make sure they know that it’s going to cost them.
I like making late payments a central part of the initial contract for work. Get someone to sign off on the payment plan early in the game makes it much easier in the long run. Feel free to remind people that they signed off on the penalties when you remind them about deadlines.
5. Pick up the phone
We love email, and a lot of great tools exist to help your business get paid digitally, but sometimes, a voice can help. When things are coming down to the wire, or if you’re not getting a response online, give your client a call.
When I was chasing down payments for a small business, I found that getting someone on the other end of the line often made the difference. You can make that personal connection over the phone that’s sometimes lacking in email.
As a final straw, you can call the person who signed the initial agreement, subtly reminding them that they’re the one on the line for late payment fees.
Generally speaking, people want to pay when they’re supposed to pay. You’ll come across very few customers who are actively trying to shortchange your business. But people get caught up in the day-to-day of their own worlds and they overlook the things that are important to you.
Set expectations, remind them, and make it easy for them to pay you, and you’ll see a huge improvement in your cash flow consistency. To check out some top rated invoicing and billing software solutions that can help you do just that, check out Capterra’s full listings.