How to get paid faster

Updated: Aug 3

Cash flow is critical to every small business. Unless you have significant reserves of cash, a gap in cash inward, or a spike in cash going out (or both), can leave you in a pickle. A lack of cash can make it difficult to pay employees, purchase the materials of production, invest in assets, or pay your bills on time...all risks to your business.

Fortunately there are some simple ways to help maximise cash flow, and while a solid revenue stream is always important, these tips can help you make the most of your cash.

Invoice promptly

When you've done the work, or sold the product or service, invoice it immediately. This is a no brainer for retail where payment is provided at the point of sale, but for those who provide goods and services upfront, followed up by an invoice, every day that you delay in raising and sending that invoice is another day the cash remains in your customer's pocket. If you don't need to wait until the end of the week, or month...don't. If the delay in invoicing is due to disorganised or inefficient bookkeeping processes, it's important to get that sorted out.

Keep payment terms tight

If you provide payment terms to your customers, make sure they aren't too generous. Do you customers need 30 days to pay? Maybe a shorter timeframe is appropriate. For example, 21, 14 or 7 days? This will often depend on what your industry finds generally acceptable, but don't be afraid to go against the norm. You need to be careful not to alienate customers as they may take their business to those who can offer more favourable terms. Importantly, you should have all your terms documented, available and well communicated to your customers.

Provide more ways to pay

If you can give your customers more ways to pay, you increase your chances of being paid quicker. Cash (yes, it is still an option), electronic funds transfer (EFT), PayPal, credit card, Bpay, and 'buy now-pay later' services are all options that may be available depending on your business. The latter is relatively new, and is becoming widely available, especially with online retailers. Just be sure to check out the costs. With the more common offerings (e.g. Afterpay, Zip etc) there is a cost to the merchant...and it is usually significantly higher than other merchant payment services. Most providers will forbid you from levying a specific surcharge to your customers, but that doesn't mean that you can't build these costs into your overall pricing structure.

Setup payment buttons on your invoices

Many invoices are sent electronically these days. Make is super simple for your customers to pay their invoices by adding a payment button (e.g. Pay now) to them. The more recognisable bookkeeping and accounting packages like Xero and QuickBooks allow you to connect to online payment providers (e.g. PayPal or Stripe) and display them on invoices - this means your customer can click on the button and make a payment instantly. No need to go into Internet banking and make a transfer - who's got time for that!? Again, just make sure you look at the associated costs and think about if you need to recover them from your customers.

Send automated reminders

Almost all the major accounting and bookkeeping software products allow you to set up automated payment reminders to customers. These can be emails, SMS or even Messenger or WhatsApp messages. They are always customisable so even though they are automated, you can still maintain a personal touch. And you can setup whatever schedule you like. Whatever works best for you. Keep automated reminders polite and on brand, and remember, when a debt becomes delinquent, there is no substitute for a personal call.

Send statements

If you provide payment terms to customers, or you send quite a few invoices, a regular account statement can help customers keep track of the invoices you send to them, as well as provide a timely reminder to pay. Customers should use the statement you send them to reconcile the creditors sub ledgers, and identify any missing invoices, or errors. After all, you could be waiting for payment of an invoice that the customer never received, or has a dispute with.

Keep track of outstanding invoices

Regularly review your aged receivables reports. That's a list of all invoices you've sent to customers that remain unpaid, listed according to how long ago they were raised. This can be beneficial in planning for your cash flow. If you know how much roughly you have coming in 30 days' time, you are in a better position to plan your cash outflows. And they show you quickly those invoices that are outside your payment terms.

Pick up the phone

It's not the nicest task, and it fills some people with anxiety, but sometimes a customer just needs a little more prompting. If a customer is having their own cash flow problems, you won't know unless you contact them, and often a customer won't volunteer that information, opting to just ignore the reminders for as long as they can. Most times, unless there is a dispute, customers will respond positively to a polite follow up.

Offer a discount for early payment

This may not be an option for every business, but a small discount can provide an incentive for customers to pay quicker. Think about what your margins can take, to decide if it is an option for your business.

Impose a fee for late payment

This one should be approached with caution. If cash flow is absolutely critical, and you face direct costs associated with late payments, then a late fee structure could be an option. It is never viewed favourably by the customer and so it is often not recommended for businesses with many competitors - it's preferable to incentivise with the carrot over the stick where possible.

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