Poor cash flow is the reason why 82% of SMBs fail. This stat should be a wake-up call for all entrepreneurs to take their cash management and billing more seriously. There’s a rule of thumb which says that the longer you wait for your client to pay for your products or services, the less likely that they’ll eventually foot their bill. So, having an effective billing system in place is crucial for the growth of your business.
Here are some tips and tricks on how to create this strategy and not worry about whether you’ll get your money or not ever again.
Accept Various Payment Options
It’s much easier to get your customers to pay if you offer them various payment options. This significantly improves customer satisfaction and reduces any potential delays, as consumers highly value having an abundance of choices. Checks are still a preferred option for many people, but an increasing number of customers turn to mobile and other kinds of paperless payments. The less time they have to spend filling forms and checking whether they entered the right account number, the faster you’ll get your money.
Besides the speed, security is another important factor, so make sure that your website is encrypted and that you have adopted the HTTPS protocol. Sometimes the problem lies in today’s hectic schedules and the fact that we can’t memorize all of our daily tasks. That’s why it would be a good idea to prevent late payments by introducing notifications and alerts to remind your customers when it’s time for payment to be made. An even more effective way to overcome this obstacle is through secure direct debit solutions, which practically means that you can automate recurrent payments and processing.
If you set up a billing strategy, keeping things organized is crucial for staying on top of things. What you should do is introduce centralized billing and invoice tracking. In other words, both you and your team will be able to keep an eye on the effectiveness of your billing system. This will provide you with a detailed insight into the average payment time, the amount of money that still needs to be collected, as well as which companies frequently fall behind on their payments.
Invoicing Should Be Your Priority
It’s true that many times customers fail to meet their payment deadlines for various reasons, but more often than not, business owners also tend to be very relaxed when it comes to invoicing.
Here’s a very simple and straightforward tip – send out your invoice as soon as possible. After you’ve delivered a product or service, or upon completing a project, don’t hesitate to invoice your customer. If you’re not prompt about this, it’s very easy to forget about it as time goes by.
And here’s another detail that you should pay attention to: don’t forget to put a deadline on your invoice to create a sense of urgency. Companies which charge penalties for late payments should state how much the charge is. Normal practice says that these penalties are usually 1% or 1.5% of the invoice amount and their intention is not to punish your clients or rip them off, but simply to get them to be more careful about fulfilling their obligations.
Include Payment Terms and Conditions in the Contract
This is the best way to make sure that you’ll receive your payments one way or another. All your contracts should include the price of your products and/or services, as well as how much time your clients have to pay for them. Non-payment penalties, that is a period of time after which you discontinue your services if a client doesn’t pay, should also be clearly stated. Finally, inform your clients how your company deals with terminated contracts, and what legal actions they can expect if they fail to fulfill their financial obligations.
Secure Your Payments with Retainer Agreements
Retainers provide both companies and their clients with a certain degree of safety. This kind of agreement will make sure that you’re paid in advance for your services, while your clients will know how much time it will take you to complete your project. However, clients usually think that retainers are beneficial only for companies and they’re under the impression that they’re overpaying for what they get. In order to convince your clients that such agreements are favorable and advantageous for them too, you can offer them a discount if they’re willing to switch to a retainer agreement. Using a time-tracking software will make this whole arrangement more transparent and your clients will be able to track how many hours of work you put into the project.
Track Who Pays You
This seemingly irrelevant information can be a game-changer. Namely, in case that your client is a small business or a startup, then probably the person who writes you a cheque is the business owner, while medium-sized companies have the accounting department which takes care of payments. In either case, don’t hesitate to ask for that person’s name, phone number, and email, so that you can get in touch with them directly if your payment is late.
It takes 3 weeks on average for an invoice to get paid, and this can have a serious impact on your cash flow. So, it’s crucial to polish your follow-up strategy and pair it with good manners. Sometimes a short email will do and you’ll soon receive your payment, but sometimes you’ll have to be more persistent and send a couple of follow-up emails. That’s the reason why you should come up with a series of email templates that will be sent at predefined intervals. Make sure that you use the words like “please” or “thank you” as they can make a big difference. People are more inclined to make a payment faster when you’re polite, so ensure that your emails and messages contain pleasantries.
These simple tips can help you get your money faster and establish a steady cash flow.
About the Author
Elaine Bennett is a marketing specialist and a blogger. She writes about business, marketing, and finance, and she’s passionate about helping startups and small businesses grow. You can find more of her work on Bizzmark Blog.