In a world where the average invoice is paid two weeks late, our team once again takes to the streets to find out how savvy business owners are overcoming the odds and getting paid on time – every time. Hint: It’s not magic.
When you consistently get paid on time, you have the financial resources you need to successfully operate your business. Faster payments often mean accelerated growth of the business. This allows you to pay for the things that are important to you and live the life you deserve.
Although studies in the United States show that on average, invoices are paid two weeks late, savvy business owners get paid on time practically every time. What do these business owners do that others don’t?
1. Payment terms, scope of work, and costs are always included in the contracts they sign
When you have an accounting policy, it’s easy enough to add the section that pertains to your payment terms to your invoice. So, for example, in the signed contract, you could state net 30 days, and after that, you will charge the client a 10 percent late fee.
Although net 30 days is common accounting language, some business owners believe it’s better if you say payment due in 30 days, so all clients understand the timeframe in which they must pay you. It’s up to you what language to use.
2. Include the right information on your invoice
In addition to payment terms and the amount due on your invoice, include an itemized description of the work done and the types of payment accepted. If you have to collect any kind of taxes, make sure that you include your tax ID number.
3. Always get a deposit before the work begins
Savvy business owners require a deposit before they start a project, and they get additional payments during the project, depending on the size and length of the contract. They never wait for full payment at the end.
4. Go on retainer
Successful business owners go on a monthly retainer in situations where it makes sense. Think about the work you do for your clients – are there situations where you could go on retainer?
5. Finance outstanding invoices
It’s becoming increasingly popular for businesses to leverage their outstanding receivables as a source of working capital through online invoice financing platforms like FundThrough. You’ll get the cash you need to operate your business within one business day.
6. Develop relationships with the people who sign off on your invoices and process payment
When you have relationships with these key people, ask if they can process your invoice early. And if for some reason an invoice remains unpaid, you have someone to call to find out why. This is important, especially if you have big bills that are due.
7. Offer incentives to clients who pay early on larger contracts
It cannot be said enough that business is about relationships. Let your clients know that you care about them in tangible and intangible ways. One tangible way is to offer incentives to your best clients – those who consistently pay early on larger contracts.
Each month choose one of the practices above that’s new to you and start applying it to your business.