Getting your customers to pay on time. Doesn’t that sound good? At some instances, it might sound like a dream. If there is one thing we (small business owners) can all agree on, is that we all want our customers to pay on time. These lag in payments may cause our business cashflow issues as, so do we, have suppliers to pay (which regards us as clients to other people).
From this we can see that timely payments have a knock-on effect on the economy. You get paid on time, you can then pay your suppliers on time and so forth. By having an on-time payment cycle, this can better the economy and prevent small businesses such as ourselves from running into cash flow issues.
According to Xero, a global small business platform, there is an estimated R99,800 owed in late payments to every SME at ANY given point in time. If you look at the amount of SMEs operating in South Africa currently, you can work out that late payments could equate to a staggering R249.5 billion.
So, what can you do to get paid faster? How can you extract yourself from the above statistic? We have highlighted a few tips to allow you to shorten the time between invoice and payment.
1. No Ambiguity
When it comes to invoicing, you have to make sure that the date and your payment terms are at the top and possibly highlighted, where they cannot be missed. Also, in your invoice, make sure that the item, date of delivery and amount are stated clearly and the client can see that there was a signature of acceptance of delivery of goods.
2. Get Creative
There are a lot of ways in which one can get creative when listing their payment terms on the invoice. While it doesn’t solve the main issue, one of the best ways to eliminate a portion of the cashflow pressure, is to require a deposit and the full amount at a specified date. That way, a certain portion of the full amount due, is accessible to you to carry on operating and possibly fulfil future orders.
3. Invoice Instantly
It is very important, as a small business owner, to invoice for your product or service immediately. Late invoice means late payments. If you are trying to bridge that gap in late payments on your cashflow, you need to make sure you invoice right away. Always remember, your clients cannot pay for an invoice they haven’t seen. We, at Fundrr, always suggest using an online invoicing system, as that you can track receipt of the invoice.
4. Be Flexible with your Payments
Since, the whole point of this exercise is to try minimize the delay in getting paid. We suggest offering your customers multiple ways of paying you. The easier we make it for them, the easier they will perceive it, the easier you will receive your payment. There are many various ways in which you can accept payments these days. As technology advances, so do payment methods. Offer them to pay you in cash, credit card, debit card, QR code, EFT, etc. There are so many options these days to offer to receive payments. Make use of one of these and it will help you receive payments quicker.
5. Manage Your Relationships
When it comes to relationships, it’s always considered an art. Understanding your clients and having the emotional intelligence to deal with them all on an individual level, takes skills. These skills are developed over time. You have to use your instinct to break down all of your clients and understand who you can start holding back supplies to, due to late payments, or who you have to continue as they have been a long-standing client. Differentiating and categorizing your clients is important to know who you leverage your product against, or who to carry on supplying.
Understanding your business and your clients, will create an edge when it comes to early payments. It is vital for every business to try reduce the payment lag but at the same time, maintain the relationships. In most cases you want your customers to view you as a partner rather than a supplier, but at the same time, you have your own business to take care of.