How to Get Invoices Paid Quicker: 10 Fast Payment Tips for Small Business
Small businesses rely on quick payment of their invoices to cover their expenses and maintain a steady cash flow. Prompt payments can help improve your company’s financial health and make your accounting process easier. There are simple strategies small business owners can employ to encourage clients to pay their bills on time, or even ahead of the invoice due date. To ensure invoices get paid quicker by clients, it’s important to send invoices out immediately after completing work on a project, offer convenient payment methods and be willing to follow up as soon as an invoice becomes past due.
These topics will help you become an expert on getting invoices paid quicker:
How to Get Invoices Paid Faster: 10 Tips
Small businesses and freelancers need to get their invoices paid on time so they have enough money to cover their own expenses. Follow these tips to get clients to pay faster for your services:
1. Request Deposits or Prepayment
One of the easiest ways to get paid quicker and ensure you receive payment for your work is to request a deposit or even full payment for a project before you get started on the work. This is especially helpful and relevant for bigger, long-term projects that could take several months to complete. Having a deposit paid upfront will ensure you have some income to cover the costs associated with completing the project, including purchasing supplies or software. It will also help you maintain a strong cash flow to pay your other business expenses.
2. Create Clear, Simple Invoices
If you’re having trouble getting clients to pay you on time, the problem could lie partially with your invoices. Make sure your invoice design is clear and streamlined. Poorly designed invoices can lead to delayed payment because the necessary information might not be easy to find and this can confuse your clients. Make sure your invoices include all the necessary information your client needs to make a payment. The most important information should stand out, including the total amount due and the deadline for payment.
3. Invoice Immediately
The faster you send out invoices requesting payment for your work, the quicker you’ll get paid. Make it a habit to send an invoice to your client as soon as the project is completed; you can even send the invoice along with your final draft of the work. Not only will the invoice be due sooner than if you waited for the next billing period, the project will be fresh in the mind of your client, which might remind them to pay the amount owing quickly. If you invoice right away, the work is also fresh in your mind, so you’re less likely to make mistakes on the invoice that could lead to delayed payment.
4. Set Clear Payment Terms Up Front
Make sure you clearly discuss your payment terms with the client up front and outline the details of those terms on your invoice. That way, your client will know exactly when payment is due and what the penalties are for late payment. If you let your client know these details when you’re discussing a project and signing the contract, it’s less likely there will be confusion about your payment terms down the road, when the bill comes due.
5. Accept More Payment Methods
Give your clients as many ways to submit payment as makes sense for your small business. Giving your customers flexibility with their payment methods can make the entire process easier and quicker for them, which in turn gets you paid quicker. As well as more obvious payment methods like cash and credit card, consider accepting online or mobile payments as well, to diversify your payment options.
6. Allow Automatic Payments
A great way to get paid quicker and know exactly when you’ll receive payment from a client is to allow automatic payments for your invoices. Automatic payments give clients the option to have the amount owing charged to their credit card or debit card automatically on the same day each month, so they don’t have to lift a finger in order to pay you. This simplifies the process for the client and eliminates the guesswork for you of wondering when you’ll be paid for your work.
7. Offer Incentives
Offering incentives to clients for early payment, such as discounts off the invoice total or other forms of rewards, can help develop a habit among your clients of always paying bills ahead of the due date. You can offer a small discount, such as 2 percent off the total price if the bill is paid within 10 days of the invoicing date. It might not save clients a ton of money, but it shows them you appreciate their business and can help you receive payment promptly.
8. Enforce Late Fees
You can think of incentives as the carrot and late fees as the stick: incentives reward good behavior and late fees penalize the bad habit of missing payment deadlines. You should charge late fees on your unpaid invoices to encourage clients not to miss any deadlines. Make sure you clearly include the details of your late fee policy on your invoice in the payment terms section. It’s also a good practice to discuss your late fee policy directly with a client before you start working with them, so there are no surprises down the road.
9. Follow Up on Late Payments
If a client’s invoice is past due, don’t hesitate to follow up with them. You need to be diligent about chasing down late payments to ensure your invoices get paid. The day an invoice becomes past due, send a brief reminder email to the customer informing them the payment is past due and reminding them of the payment methods you accept. Continue to send reminders at regular intervals, both by email and phone, until you secure your payment.
10. Always Be Polite
It’s important that you’re always polite with clients when sending invoices and following up on past due bills. Include a pleasant “please” and “thank you” on your invoice and in your accompanying email to show your gratitude and leave a good impression. Being calm and polite with clients when their payment is overdue can ensure you maintain a good relationship and don’t sabotage opportunities for future work with the company.
How Much to Charge in Late Fees on Unpaid Invoices
To help get paid quicker, small businesses and freelancers should consider charging late fees on past due invoices. Having a late fee policy on your invoices can encourage your clients to pay their bills on time, to avoid being hit with extra charges. Make sure the details of your policy are clearly outlined on every invoice you send. You should also discuss late fees with clients before you start a project. The amount that you’re able to charge in late fees will depend on the state you live in. States govern the maximum annual amount of interest a business can charge. It’s common for small businesses to charge 1.5 percent interest per month, and this shouldn’t violate your state’s usury laws. You can check the maximum amount of interest allowed in your state online.