One of the keys to running a successful business is the ability to invoice in a way that gets you paid more quickly. Cash is king and without consistent cash flow, your company will almost certainly go out of business. The bottom line is you can’t pay the overhead costs that keep your business running without money coming in.
The best way to ensure you are receiving payment on invoices immediately is to ask for payment upon delivery of your service or product. But unfortunately, this isn’t always a possibility, and when your business has outstanding accounts, that account becomes stagnant and an account receivable is formed. This is essentially a loan you are extending to your client until they pay the outstanding invoice.
Establishing billing and collection strategies that allow you to receive your outstanding payments in a short time period will be key to having a healthier cash flow into your business. It is imperative that you monitor your accounts receivable at least once per week. Here are four tips to help you get paid more quickly:
- Don’t Let Your Business Become A Bank
Be careful to not offer credit to too many clients. And when you do offer credit, those accounts need to be carefully monitored to ensure they don’t become delinquent. It can be scary to approach your clients about delinquent accounts, but it is necessary to keep your company’s bills paid. Remember that you delivered the product or service, and there is nothing at all wrong with asking for payment.
- Clients Respect Your Need For Cash Flow
Most clients have more respect for companies that recognize the necessity of cash flow and actively pursue account collections. Seeking payment for an unpaid invoice is not a sign of weakness, but rather proof that you run a good business.
It is best that you don’t extend credit to your clients at all, but if your business can’t avoid this it is wise to at least ask for an initial deposit to be paid. If that isn’t an option either, establish a shorter timeframe for when the invoice payment is due. For instance, you can set your terms as net-10 days or “payment due upon receipt” to encourage prompt payment.
- Find The Path To Payment Approval
Receiving the first payment from a client is usually the most difficult, especially from larger organizations. You can cut down on your wait time by determining what the approval path is within that organization. For example, find out whether or not your business needs to fill out IRS Form W-9 and what department the invoice needs to be sent to. It is also wise to find out if you can send an invoice electronically via QuickBooks or if it needs to be mailed.
Another strategy is to call the company after the first invoice is sent to ensure it was received and ask when payment is expected. Then continue to follow up with the company until the payment has been safely delivered.
- Remember That Most Businesses Want To Keep Their Bills Paid
Most clients will appreciate friendly reminders regarding unpaid invoices. It is not necessary to jump to debt-collection strategies and badgering. If you have someone who consistently isn’t paying their bill, turn that account over to a collections agency and refuse to serve that company again in the future. Or you can ask for payment upfront or a deposit in the future.
Following these invoicing tactics to get paid more quickly will help you speed up your cash flow and help you to manage your accounts receivable more efficiently.