Top tips for improving the speed of invoice payments
Businesses are settling their debts quicker as the year comes to a close, but there is always room for improvement when chasing up invoices.
Poor cash flow affects many businesses, but SMEs often struggle the most when invoices are left unpaid.
The good news is that late payments are down overall from last year, according to figures from Illion. The firm, formerly Dun & Bradstreet, revealed the average late payment time was 12.6 days in the three months to September - 9.1 percent quicker than the corresponding quarter in 2016.
But there is always room for improvement, which is why we've compiled some top tips to help businesses streamline their invoicing processes.
1. Develop a strong credit collection policy
The first step is to create a clear invoice management strategy and ensure all employees are adequately trained to enforce the rules.
Your policy needs to include both proactive and reactive processes. This will enable you to identify reliable suppliers and clients before doing business with them, while also having procedures in place if problems arise at a later stage.
2. Provide clear payment terms and conditions
Your payment terms should be clearly outlined in your invoices (as well as any sales contracts) to avoid any confusion about when and how you expect to get paid.
Offer a wide variety of payment options to make the process easier for clients.
3. Be polite
It pays to be nice. Literally. Including pleases and thank yous on your invoices can boost the amount of debts your business settles by more than 5 percent, according to FreshBooks analysis.
4. Don't delay reminders
The polite approach doesn't mean you should be a pushover, however. You'll need to send reminder letters to ensure your invoices aren't sitting ignored in someone's to-do tray.
If you use software to track payments, you may be able to set up automated reminders to ensure nothing slips through the cracks.
5. Pick up the phone
We live in a technology-driven age, but emails, SMS alerts and other digital reminders are easily forgotten or ignored, particularly in busy work environments.
Sometimes, picking up the phone and contacting late payers directly is the quickest way to confirm the status of an invoice.
6. Offer discounts or fees
Clients may pay more quickly if you provide discounts for settling an invoice before a certain deadline. Alternatively, some firms add penalty charges to their invoice terms to discourage late payments.
Do you prefer the carrot or stick approach?
Always have a back-up plan
Our tips should help you implement a more structured and efficient payment collection process. But even the best policies won't stop all late payments, which is why you should always have a financial safety net in place.
Debtor finance can help you navigate challenging cash flow periods, so please contact Classic Funding Group to discuss our comprehensive range of tailored solutions.