Small businesses often need help managing their invoices. Late client payments can cause cash flow problems, and manually processing invoices can be time-consuming. However, there are several ways that small businesses can speed up their invoicing process and maintain a healthy cash flow. In this article, we'll give you tips on how to improve your small business invoicing so you can accept payments faster.
Create a contract
Establishing clear payment terms with clients when starting a business relationship is essential. The best way to do this is by creating a contract outlining your transaction's most important elements. Each party should comply with the agreement's terms before any work starts. Additionally, invoices aren't legally binding, so a contract can help protect your small business from invoice disputes.
During the contract creation process, consider these tips to help you build a solid business-client relationship:
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Negotiate clear payment terms upfront: Ensure the contract outlines payment terms, deadlines, late payment penalties, and other essentials. This allows you and your client to clearly understand the payment policy, including when invoices are sent and how long they have to pay. You can clearly define these payment terms on your invoice template - e.g., "due upon receipt" or "net 30" terms.
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Request upfront payment of deposit: For larger projects, consider establishing an agreement to have your client pay half the bill at the start of the project and the other half when it's completed - i.e., progress payment. This process can help improve cash flow and set expectations with your client to pay you before the projection completion.
Make payments easy
The easier it is for your client to pay their bill, the less likely you'll have to confront them about a late payment. Here are some ways you can facilitate this process:
Provide plenty of payment options
Ensure to offer a wide variety of payment options, particularly online methods. Whether it's a credit card, direct deposit, or an application, online payments can significantly speed up the payment process. Many clients prefer to pay invoices online as it's quick and convenient. By incorporating online payment methods, you can reduce the time it takes to accept payments.
Use invoice software
Manual invoicing takes too long to process, and sending them in the mail increases the risk of getting lost. Streamline your small business invoicing by utilizing software. Invoice software allows you to send invoices instantaneously, saves paper, reduces mail expenses, and makes credit card processing a breeze. You can easily track your invoices and see who has paid and who hasn't. Plus, if you make a mistake or need to revise the invoice, you can simply edit it and send the updated invoice to your client right away.
Bill clients wisely and professionally
Consistency and courtesy towards your clients can ensure you get paid faster and on time. Here are a few ways you can make this happen:
Send invoices promptly
Promptly sending invoices is crucial to ensuring timely payments from clients. Invoices should be sent as soon as possible after goods or services have been delivered. This will ensure that clients clearly understand what is due and when.
Stick to a regular payment schedule
Whether you're sending an invoice weekly, biweekly, or monthly, ensure you stick to that schedule. Standardizing the invoicing process can help minimize confusion regarding payment due dates and can be the difference between getting paid and not receiving payments on time. An automated invoicing system can significantly reduce the time it takes to send invoices and receive payments. These systems allow you to set up recurring invoices for specific intervals, saving your business time and resources.
Use friendly, professional language
As simple as it sounds, adding friendly notes such as "Thank you, [name]!" or "We appreciate your business" to your invoices can go a long way. Forging positive, professional relationships with your clients can help ensure they pay you on time.
Follow up on late payments
Late payments can be a major headache for small businesses, especially if it impacts your cash flow. But no matter how efficient your invoicing process is, overdue payments can happen since clients get busy and emails get forgotten. It's important to have a process in place for following up on late payments, so here are a few actions you can take to help avoid late payments as much as possible.
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Keep a good rapport with your clients: Acquiring a new customer can cost five to 25 times more than retaining an existing one, so try to keep an open, communicative relationship with your client. If late payments become a recurring issue, a strong partnership can help resolve these problems and reach an agreement without dissolving the relationship.
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Send reminders: Send friendly, professional reminders up until the due date and on it. With your invoice software, you can set up automatic reminders to be sent out both before and after the deadline.
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Offer early payment discounts: Offering discounts for early payments can be a great way to encourage your clients to pay you faster. You can offer a small discount for payments made within a certain timeframe, such as 10% off for payments made within 10 days of the invoice date. This will incentivize your clients to pay you sooner, which will help you improve your cash flow.
By implementing these tips and utilizing invoice software, you can simplify your invoicing process, improve your cash flow, and focus on growing your small business.
