Unless you run a streamlined accounting system that sends invoices out to all active customers on the same day, there are plenty of things you can do to ensure that you time your invoices optimally. Capturing your customers’ attention at the right time can be critical in getting paid earlier than their other creditors. Here are some suggestions on how to stand at the front of the queue.
Request deposit payments
Most customers understand that a deposit is required for many transactions. Particularly for service providers, asking for pre-payment of a deposit doesn’t just bring in an injection of funds to get the job started; it also ‘invests’ the client in the project. Too often, if clients aren’t required to pay a percentage of the quoted job fee in advance, they can drag their feet on fulfilling their end of the deal to help the job proceed. Then it costs you more to follow up, request information, secure an appointment to conduct a briefing and any number of other elements that help you move forward.
A big reason why deposits are important is because once a client is financially committed to a project or a sale, they will be keener to see it reach its conclusion.
Change your payment terms to 7 days
Small businesses can least afford long payment terms. Providing clients with 30 days may be a luxury you simply can’t afford and, professional courtesy aside, it may not be viable for your cash flow. When altering your payment terms to 7 days, you need only advise your existing customers that it’s happening, but you may like to give them a two or three month grace period to settle into the new rhythm. And anyway, even if some customers’ accounts fall behind by a few days, you’re still in a far better position than you would be with 30 day terms.
Upon job completion
Before you provide services to a client, send them your Terms of Service so they know your payment terms from the outset. If you desire to be paid within 7 days or 30 days of job completion, state this clearly and have your client sign the document. When you’ve delivered the work, send an email asking your client to approve the job as final. Then you can send your invoice immediately without appearing unreasonably eager to be paid.
Avoid BAS or EOFY time
Most businesses find themselves exceptionally busy around the end of the month (for BAS) or just after 30th June (for end of financial year). Try to send your invoices so that they arrive before the frantic bookwork days or weeks that coincide with ATO obligations.
Public holidays and seasonal downtime
Never delay doing something that can be done better, sooner. Maintain a calendar of public holidays and seasonal events that could influence your Accounts Receivable interests and keep a close eye on anything that might result in delayed payments. Easter and Christmas are notorious times of the year when payment cycles are upset by public holidays, business closures and delayed mail. Get in before the issues arise and you could receive payment before the tinsel even goes up.
Be guided by your eager-to- pay customers
There’s never any harm in asking a customer if you can invoice them sooner rather than later. In fact, some customers are debt averse (bless their hearts!) and prefer to keep the decks clear of bills wherever possible. Over time, you’ll come to know who these gems are and you can always count on them to keep your balance sheet healthy.And by the way, if a customer asks for an invoice on the spot, don’t hesitate to provide it without delay. They would know their own cash flow position and be ready to pay immediately. If you don’t strike while the iron’s hot, you may miss your best window of opportunity.
Invoices for small sums
Don’t fall into the trap of avoiding sending invoices for small sums. By the time that customer accrues a larger debt with you, they could be out of business or they may not even remember the small figure for which you should have invoiced them earlier. Or, another employee may have ordered the goods or service and left the company, or the supporting paperwork may have been filed. Always send invoices in line with your usual terms.
When it comes to money, sooner is always preferable to later. Be assertive, listen for cues, make decisions based on your business’s best interests and be aware of any external influences that could result in heavily delayed payments that are no fault of your customers’.