Cashflow is one of the biggest issues facing small business. We all complain about it and get upset at the client who has not made payment, particularly if you have gone out of your way to do a great job for them. In my business cashflow management is a huge issue as we have a large number of clients and it is very easy to lose control of our Accounts Receivable. You need to be vigilant. Take you eye off those debtors and they can very quickly get out of hand.
Money is what makes business happen. If we don’t invoice our products and services, we don’t get paid and we are no longer in business. Yet discussing price and payment is a topic that many of us do not feel comfortable with. I know, because I am one of those business owners who cringes at discussions on pricing and payment. Debt collection is without doubt my least favourite part of owning a business.
There will always be clients who don’t pay you bills or have difficulty paying our bills, but are we doing the best we can to give our clients the opportunity to pay our bills? What is your invoicing process? How easy is it for your client to make payment?
Here are four tips to help your client make timely payments of your invoices.
1. Use an online invoicing system
Whether you are using Xero, QBO, MYOB or a purpose-built app, there will be the ability to create and send your invoices on the spot. Honestly, if you are still handwriting your invoices you need to move into the 21st century. We have mobile technology in our telephones that is infinitely greater than anything we could have imagined 20 years ago (when it was standard practice to hand write or type up invoices). Everyone who is below the age of 80 (and many who are over the age of 80) has an email address. Why are you not using the mobile app on your phone or tablet to create the invoice and deliver it (via email) while you are with your client? I guarantee if you sit down with your accountant for 1 hour to get your invoice program set up, and you genuinely take an interest in learning how to use the program – you will be able to do it. The investment you make by paying your accountant to help you, taking the time to learn and paying the subscription fees for the software WILL pay off if you embrace the technology.
The faster you get your invoice out – the faster you will get paid.
2. Attach a payment system
Do you have the option on your invoices to press the “Pay Now” button to allow for fast and easy payment? If not, why not? There are many payment apps out there that easily connect to your accounting system to make payment as easy as possible. Examples such as Pinch (see link to interview below), Stripe, Go Cardless and Paypal are all very simple to set up. These systems charge you for each payment, so you only pay when the service is used. In many cases you can get the client to pay the fees, or perhaps you just accept the fees as part of doing business (and getting paid faster).
3. Consider a card reader so you can get payment in person
The Square card reader is now available at Officeworks so it is fair to say that mobile payment devices are becoming mainstream. It is a simple mobile app and a small device that allows your client to tap their card while you are out on site. You can’t get paid much faster than that. For more details check out their website.
4. Debt collection policy
It is important that you have a policy for debt collection, but that policy needs to be followed closely. Due dates are given for a reason so if the due date has passed, follow up. There are some people out there who will not pay invoices until they have been followed up (which I personally think is very disrespectful as a customer) but be aware that some of your clients may be waiting for you to chase them because that is their arrogant way of doing business.
As a customer I don’t wait for a follow up to pay my invoices, but I do sometimes forget that something is due and payable. Maybe the invoice has been sent to one of my staff, so I was not aware it needed to be paid. Maybe my busy schedule has not made paying an invoice as a priority and I have simply overlooked it. Maybe you need to do something to get my attention? I am sure in most cases non-payment of invoices is simply due to an oversight.
Whether it be an automated invoice reminder (set up in Xero), a statement, an email or a text – a soft communication method will normally get your invoice paid. If that doesn’t work a follow up phone call should be made to remind your client that you did something for them and they have not paid for it. It is not for you to be embarrassed about – they are the ones who have not paid. There should be no fear in asking for what is rightfully yours.
If you do not feel comfortable making these calls consider a debt collection service. An example is Chaser https://chaserhq.com/, which is an app that integrates into Xero and provides real follow up on your outstanding debts. There is nothing wrong with outsourcing the tasks you don’t feel comfortable doing. Your time is valuable so paying someone else to do something you don’t like doing is never a waste of money.
You have done the work and you deserve to be paid for it. Take this part of your business seriously. If cashflow is an issue for your business think about what changes you could be making to improve your cashflow.