Cash is King! Collecting cash can be one of the biggest headaches for small business owners – here are 6 tips to shorten the cycle:
1. Send your invoices pronto– after a project is completed, it’s all too easy to move on to the next one and forget to invoice, but a customer has no obligation to pay until the invoice is received.
2. Spell it out – explain all the elements of the product or service require so the client fully understands what they are paying for and there is less opportunity for payment delaying queries.
3. Split the difference – consider splitting a large bill into a number of smaller invoices – a client with cash flow issues is more likely to perceive a large balance as a problem and therefore sit on it, whereas smaller more manageable amounts are likely to be paid more quickly.
4. Highlight terms – confirm terms upon engagement but also reiterate them on your invoice so that the payment deadline is clear, also pointing out any late payment action such as interest and charges payable.
5. Consider early payment discounts – of course you want to be paid in full for work you have undertaken, but if it comes to the cash being in your pocket rather than the clients, then you may want to offer a 1% discount for payment within 10 days, for example. The earlier you get paid, the less risk of something happening to your customer, plus from a working capital perspective, it lowers your cost of borrowing (important nowadays when business finance is harder to access).
6. Be friendly and polite – if the person paying the bill is not your immediate client, then be sure to build a relationship with them too – plus research has shown that messages such as “thank you for your business” can increase the chances of your invoice being higher on the list of payables.