There really is no feeling like running your own business after years of working for someone else. You have the freedom to make your own decisions, the ability to organise your time as you feel necessary and the capacity to drive your business forward with your sheer passion for seeing your company thrive.
But of course, with all the added benefits of being your own boss also come the not-so-pretty counterparts of sitting at the top. Additional stress, sleepless nights and being held ultimately accountable when situations like COVID-19 arise are just some of the things featured in your life as a business owner... and sometimes, another unwelcome component is overseeing the dreaded invoice recovery process.
The reality is that no-one likes to feel like they are constantly hounding another for something and that is even more so the case when it comes to chasing late payments. It’s awkward, terribly uncomfortable and during confusing times like the one we are all in now, you begin to wonder whether you will ever actually get what is owed to your business at all.
SMEs continue to fail due to unpaid invoices and for many smaller businesses, survival can sometimes rely on how long the waiting game can continue before a cash flow crisis emerges. With the ongoing pandemic putting a huge amount of pressure on finances for many businesses across the country, getting access to funds owed through unpaid invoices should be high on your to-do list.
There are funding products out there designed to specifically alleviate the obstacles caused by late payments, such as invoice finance, but there are steps your business can take alongside this type of funding to make the process of invoice recovery a lot smoother over the next turbulent business quarter. Nucleus Commercial Finance have listed them below…
Invoice Customers As Soon As Possible
The first place to start with speeding up the invoice recovery process is by ensuring you invoice your customers as quickly as possible. You can spend copious amounts of time negotiating the length of payment terms, but that is all irrelevant if you don’t send the bill on time. The quicker you send an invoice, the quicker you get paid. Putting invoices together can seem like a mundane task, but the result is always the same – you are putting a halt on getting paid. Finding the time to chase invoices might seem a little difficult right now, as there are a million and one other things you need to take care of due to the unexpected complications caused by Coronavirus, but finding a way to keep your business afloat with zero capital to work with will certainly be a lot harder.
Create Regular Payment Schedules – And Stick to Them
Payment schedules help keep everyone in the loop about when payments are expected and without them, the invoice process might soon become one of your biggest ongoing hassles. Have clearly defined payment dates and make sure all of your customers know when they are expected to provide payment. To avoid complication, pick one or two dates in the month to charge all customers, so this way, your business knows exactly when invoices are due – and this of course means delivering bills before those dates too.
Ensure Payment Terms Are Clear with Written Agreements in Place
Before you provide any services or products, you need to have discussed payment terms and confirmed them in a written agreement. The written agreements you get your customers to sign should dictate all terms, fees and payment deadlines.
Make It Easy to Get Paid
When it comes to paying, the majority of customers and clients want it to be as effortless as possible. It is why businesses have had to accommodate card payments, why there was a surge in demand for payment gateways for eCommerce and why pretty much every successful business now has a website or downloadable app – people like convenience.
Similarly, if your business wants to get paid on time, you need to ensure that it is simple and straightforward enough to do so. Accepting online payments is crucial and there are plenty of accounting software options available to assist you with this.
Learn How to Draft The Perfect Invoice Email/Letter
Using polite language is a fundamental part of the invoicing process and without it, you might find that customers or clients are less inclined to pay on time, especially if they have other payments due to other businesses too. The wording your business uses can literally have a direct impact on the number of days, weeks and for some unlucky businesses, months it takes to retrieve payments.
Research found that when it comes to invoice payment terms, being polite is the only approach to take if your business wants to get paid on time and that can mean something as simple as using “please” and “thank you” consistently. In fact, the same research discovered that using polite language increases the chance of getting paid by more than 5%.
Provide Regular Reminders
There is a thin line between helpful reminders and bombarding your customers with annoying reminders that eventually get marked as junk - but when done right, reminders can really help to keep everything ticking along smoothly.
Gentle reminders in advance generally prove to be successful and for customers/clients that are not regular late-payment offenders, a reminder rather than an interest charge will go a long way in establishing rapport. With the many accounting software apps available, setting automatic reminders has never been easier and when customers and businesses are dealing with the turmoil the Coronavirus situation has caused, a gentle reminder may be all they need to pay your invoice on time.
Charge Interest on Late Payments
Businesses often find themselves in a rut when they are too accommodating with late payments and this is how many SMEs end up struggling due to consistently late payments. One way to reduce the chance of late invoices is by stating from the offset that late payments will result in interest being charged. No one likes to pay more than is necessary, but if there are no negative consequences to not paying on time, businesses that are short on cash themselves might choose to prioritise other costs over paying your business what it is rightfully owed.
Though it is worth remembering that most businesses are in the same boat right now, so the best approach is to deal with late invoices by being understanding and willing to find a solution. Perhaps offer split payments where your business will accept partial amounts where businesses cannot provide the full amount owed at this moment in time - this way, your business still has some money coming in from invoices, rather than nothing at all.
Reward Early Payment
Similarly to penalising late payments with an interest charge, consider rewarding your customers for paying early. If you are struggling to retrieve your owed invoices on time, entice your customers to pay before their due date by deducting a small percentage from their invoice amount. Every little helps during times of financial hardship and this could be especially encouraging for customers and clients you have worked with long-term.
For more SME advice regarding the Coronavirus situation, take a look at the additional resources on our Coronavirus Hub.
1 April, 2020