From late payments to no-payments, getting clients to pay their bills can be a particular pain point for some businesses. Late payments can do more than just throw off your company’s accounting – they can cause major stability problems for your business.
By applying these five tips to your accounting process, your invoices are more likely to be handled on time, every time.
- Establish Exact Payment Terms
The number one cause of late payments is due to clients making the wrong assumption about the payment terms. They may think you operate on a net 30 basis or require payment on specific days, such as the 1st or 15th of the month.
When issuing invoices, include a contract section explaining payment methods, due dates, and other relevant details. This outlines your terms and saves any confusing in the future. You could also discuss with your clients the best format for invoices. They may have an inhouse system for submission or out-source to an accounting service, but by establishing the prefer format, invoices are less likely to go AWOL.
- Reward early and on-time payment
Give your clients a reason to pay close attention to your invoices by providing a discount for early or prompt payments. Offering a financial incentive is an encouraging approach to what is often adverse situation. While you do want to put an interest rate in place for missed billing deadlines, place high emphasis on the reward first.
How you offer the financial incentive is up to you and your business. You could offer a set discount percentage, such as 5%, for any early payment. Another popular option is to use a sliding discount scale, which starts from a high discount and slowly decreases as the invoice due date approaches.
- Offer a Recurring Payment Option
Offering an automatic payment option for clients is a simple step to reduce the worry surrounding billing dates and deadlines. If your business offers the same service each month at a set amount, setup will be straightforward.
However, if the payments vary for month to month, automatic payment can become trickier. Your client may still prefer automatic billing, but be sure to inform them of any changes or additional costs to the invoice.
- Automate Your Invoice Process
Missing, incomplete, or unclear invoices can result in late payment or sometimes no payment. Human error, such as forgetting to send the invoice after completing a job or shipping a product, is also common.
Installing an automatic system to send bills and invoices improves the accuracy and efficiency of your accounts. You can also schedule in payment reminder emails so you don’t have to chase around perpetually late-paying companies.
- Add Payment Links Directly in the Invoice
If your invoicing system supports it, integrate payment links or buttons directly into your invoices. Making invoices simple and easy to pay reduces the chance of clients becoming distracted or forgetting to pay the bill.
In a perfect world, clients would pay their invoices as soon as they received them. But in reality, we know this doesn’t happen. By incorporating these strategies into your current payment procedure, you will strengthen client relationships while reducing your financial stress.