5 ways to get paid faster
Late payments affect businesses of every size across all industries. In some cases, it can cause more than just a headache for you as the owner – it can create often very difficult-to-manage cash flow problems. There are, however, ways that you can reliably decrease the time it takes to get paid by your clients.
The problem of not getting paid on time
There are enough hurdles that you have to overcome when you have a business to run. When you aren’t being paid on time, there are three more difficulties that could come your way:
Cash flow issues
According to the Federation of Small Businesses, one in three businesses face cash flow difficulties as a direct result of late payments.
Your cash flow is important because you need it to pay for everything else in your business. The amount of money that you have coming in and going out of your business determines everything from when it’s the right time to grow your business to when you need to consider cutting your employees’ hours.
Making sure that you have enough money to cover what is definitely coming out of your account each month is essential. Your fixed costs include your employees’ wages, your office rent, and any software subscriptions you currently have.
Lack of security
Having money in reserve for your lean months gives you both peace of mind and breathing room. It’s always a good idea to set some cash aside for a rainy day (unless you are an umbrella manufacturing company, of course).
Getting paid on time means that you don’t have to dip into your safety funds in order to keep you afloat.
How to get paid on time
Panthera recommends the following ways to the business owners we work to bring down the length of time it takes to get paid on their invoices:
Inform your clients beforehand
If your clients don’t know that they need to pay their invoice within a week, then they might make the assumption that they’d still paying on time a month later. By making it explicitly clear when you are expecting to be paid by, you can remove any ability they have to plead ignorance.
Don’t wait to chase your invoices
If your problem is that you are getting paid late but you aren’t chasing up your remaining payments, then you’re only adding to the time it takes for the money to see your account. Start following up your invoices as soon as they are overdue to make sure that they aren’t delayed any further than they have to be.
Give your clients options
The easier you make it for your customers to pay, the more likely it is that they will do it on time. You might want to consider introducing direct debits, online banking, and even postal options for your clients to choose from. A recent study by Xero (UK) showed that offering clients a way to pay by credit or debit card reduced payment times from 38 days to 19 days.
Have a structure to follow
- Send an email on the first day the payment is late,
- Call the client once another day has passed,
- Email them again after a week,
- Call them one last time after two weeks,
- Write a formal warning after the third week.
This level of consistency will help your clients know that you don’t take late payments lightly. Be careful with those clients who can’t afford to pay as they may be experiencing similar troubles to you – showing sympathy and understanding for a client going through a period of financial distress will be rewarded later with their continuing custom.
We’re here to help you
Call us today on 01235 768 561 or drop us an email to email@example.com for advice and support on chasing overdue invoices – we’ll be back in touch with you shortly.