If you’re dealing with frustratingly late payments from your clients, you’re not alone. A 2015 study by cash flow specialist team Hilton-Baird showed us that, on average, invoices are paid 22.5 days beyond agreed terms. But how many of these invoices are being sent with grave mistakes inside them that are only making matters worse?
There is no all in one solution for deflecting negligent clients – but there are ways to tilt the game in favor of you and your business. This is our guide for creating an invoice that gets you paid promptly and without much fuss.
What to do Before Creating the Invoice
#1 Consider Modifying Your Policy Terms
When’s the last time you looked over your standard policy and payment terms? Sometimes we can let months pass by of past due invoice after past due invoice, without ever stopping to take a look at our policy terms and see if there’s something simple we can change about it that might help.
To avoid some of the worry that comes along with client payments, consider making prepayments a part of your policy. When customers are obliged to pay a deposit before the project even begins – whether it be 20%, 50% or otherwise – you have part of the money in your pocket from the get-go. This will both greatly strengthen your cash position, even in the case of a lately paid invoice, and decrease your chances of the client disappearing later on.
#2 Communicate with Your Client
Building the best client-business relationship you can is your first step towards securing a paid invoice. Furthermore, communicating with your customer will allow you to customize your invoice and your payment terms appropriately.
Ask them how they usually prefer to make their payments, as well as what their billing schedule is. When at all possible, provide them with the methods they like best. Discuss your terms thoroughly with your client and make sure you two are on the same page before sending over your invoice.
What to Include In the Invoice
#1 Crystal Clear Terms
When creating your invoice, your language should be polite, friendly, but most of all, easy to understand. Remember, most of your clients are probably scanning the invoice when they receive it, so the information you include should be exclusively vital and easy to find.
Your invoice should include a brief description of what they’re paying for, the total fee, due date, available payment methods, a contact number and any other details important to your company.
#2 Multiple Payment Methods
Remember what we said about asking them for their preferred payment method? While that’s incredibly important, that doesn’t mean you shouldn’t give them more options just in case! Bottom line is, giving too little payment methods can feel restricting and will almost certainly decrease your chances of a prompt payment.
When possible, offer the option to be paid by PayPal, credit card, electronic funds transfer and otherwise.
#3 Rewards & Consequences
Nothing gets a customer paying their invoice faster than a great incentive to do so. This is why guaranteeing finance charges and early discounts can be so beneficial. For a finance charge, you’re telling them that the later they pay, the more they have to pay. This will deter them from spending too long of a time waiting to respond.
In a similar light, when you offer a discounted price for those who pay early and all at once, it encourages everyone to do exactly that. It’s not a loss of money at the end; in fact, it will do wonders for your cash flow.
#4 Strong Sense of Brand
A prominent detail of your invoice should be your company logo. Ideally, your invoice should have a professional, classy and overall simple design. When using an accounting software, you’ll have plenty of templates to look through and choose from. Remember, a good-looking and branded invoice will make an impact on your client and show that you mean business.
How to Send the Invoice
#1 Know the Right Person
A big mistake many businesses make when sending out invoices is not knowing the right person to be sending it to. As contradictory as it sounds, the more people that are on the invoice, the less likely you are to get paid. If possible, remove the middleman by finding out exactly who is in charge of the payments for the client company, and have them and only them receive the invoice.
#2 Have the Right Tools
There’s a reason the usage of cloud-based accounting software is increasing every year. Having pre-made templates and a well-built platform to use when sending out invoices proves incredibly helpful. Without one, you might be consuming more time and resources than you need to.
If you’re not already using one, invest your time into finding the perfect invoicing system for you and your company.
Steps to Take After Sending the Invoice
#1 Follow Ups & Reminders
So you’ve sent your invoice, and now it’s time to wait for a response. This is where your reminder system will come in handy. After an invoice is sent, you’re going to want to have a system in place, preferably automated by a software, where you can send out reminders at a certain pace that is helpful to your client, but not pushy.
Ideally, you can expect to send out a friendly reminder a week before the payment due date and a follow-up within the week after the due date has passed, if the payment has not been made. For every reminder afterwards, be sure to be persistent and always reiterate your policy terms.
#2 Review Your Invoice System Frequently
With every new trick you learn online about managing your receivables, it might not change anything if you don’t take it into a personal perspective. Are you not being firm enough with your clients? Are your policy terms too lax?
We recommend that you make it a point to sit down and evaluate your past invoice data every three to six months. You should be taking into account statistics such as your receivables turnaround, and working with that information in order to apply changes thereforth. Where there’s an issue, there’s a solution. If your invoice system needs improvement, then the first step is always to find out where the root of the problem starts.go back