Top 5 tips – how to get paid on time
As someone who worked for many years in all types finance departments, I know how to make sure your customers pay you on time.
So, it really surprised me, when I set up my own company, the first real problem I had, was getting paid.
I knew all the pitfalls, I knew all the tips, however, I realised first hand, not all customers are the same. Depending on the size and type of business, can indicate how easily, or hard, it is to get paid.
Sole traders / Solopreneurs
The one-person business, this group is the easiest group to get payment from. They will only book a service / product when they have the money to pay for it. They are used to paying up front for what they want. Often they have little or no credit rating and can work on referrals, their reputation is everything. It is important that they maintain good relationships and therefore would not risk getting a bad reference.
Government / state bodies
This group does like their paperwork. Often you find out how much, when you are about to send in your invoice. Then you find out that you need a purchase order! You may have been booked three months ago, but nobody told you about their strict payment process. You have to send in the paperwork for the purchase order, wait until it comes back, then send in your invoice. Keep in touch with the person who hired you, you may need them to approve your invoice. Nothing you can do will make the process go any faster. Once you follow their process they will pay you in the next payment run.
Small to Medium Enterprises (SME’s)
SME’s are often going through the growth process themselves and must keep a keen eye on their own cash. This is often the hardest group to get payment from. They are watching their cashflow closely and more often than not, you will not get paid unless you chase them. Their processes can be unclear and unless you keep on top of them, they may take their time in paying you.
Large corporations can be tricky. They will have dedicated accounts staff making regular supplier payments, so payments should be quick. However, they have their processes too. It may prove difficult to send in your invoice without being set up as a supplier on their system. This process can take time, however, once you have been accepted your invoices should go through quickly.
Top 5 tips to getting paid on time
No matter what type of customer you have, often there are things that we can do, to make it easier to pay us quickly.
- Building relationships
You know the saying ‘people buy from people’ well the same can be said for making payments. If you are not known by your customer or their finance department it can be easy for them to push your payment to the back. Get to know the name of the person processing the payment, email or ring them to ask them when they are going to pay you.
This personal contact allows them to connect with you and they start to see you as a person rather than a faceless corporation. Ask them when payment will be made, once they say they will pay you on a certain date, it is very hard for them to back out. This technique works well in SME’s who often do not pay if you haven’t sent a statement or a follow up email.
- Correct paperwork
If your customer requires you to follow certain procedures, you must make sure you have what they need to approve your invoice for payment.
- Purchase Order – find out if one is needed when they are booking you to work. If you do need one, make sure this is request immediately. Often payment cannot happen without the PO. So make sure you have one before you start your work
- Invoice on time – the sooner you get the invoice out, the sooner your customer can pay. Failure to meet your own deadlines and milestones lets your customer think you do not take due dates seriously. Show your customer you run a tight ship
- Supplier Account – do you need to set up a supplier account with your customer, if so, what information do they need. Get it ready so there are no unwanted delays
- Retainer model
If you are invoicing by project or by the hour, consider invoicing the same amount each month. This will help your customer process and approve your invoice easier. It has been proven easier to get customers to pay regularly amounts rather than one off payments.
- Bespoke payment terms
Different products may lend themselves to different forms of payment terms:
- On demand – when the item is of small value, taking the payment up front when booking a timeslot or product can work. So, you have already been paid before you do the work.
- Half up front – by charging half of your bill up front, it is a clear message to both parties of their commitment to the project. Once the project or service has been completed the second half is due.
- Payment schedule – this gives the customer a choice. They can pay up front in one lump sum or they can set up a payment schedule over say 3 / 6 months. The longer the payment terms the more the customer will pay.
- Payment by milestone – for more complex or lengthy projects payment is made when certain agreed milestones have been met. This helps both parties keep on top of their cash as well as focused on the project.
- Cloud based solutions
The time when snail mail was the standard for invoicing are now gone. Today, using cloud-based accounting software helps businesses stay on top of their accounting which can save the busy entrepreneur a lot of time.
By setting up automatic repetitive invoicing, cash management is priority.
Use it to alert yourself during your billing cycle so you don’t forget to invoice for a project, and send automated reminders to your client 10, 5, and 3 days before their payment is due.
When payday finally comes, nearly all cloud-based services will allow clients to pay online, making it much easier for them to do so, and much more likely you’ll get your money on time.
Chasing after late payments is no fun. It’s awkward, unproductive, and doesn’t make you feel good. Using these 5 tips, you’ll be able to put an end to all that back and forth. Getting paid will be a breeze, and you’ll be able to spend your time where it matters most, providing your customers with the service and support they deserve.
Interested in getting your bookkeeping put into the cloud? I work with Xero, QuickBooks, Sage and Surf.
Contact me to here to book a FREE discover call.