A business lives and breathes when its partners pay their invoices on time. It’s better when they pay them early.
The economy experiences cycles that impact each sector differently. Some companies earn the bulk of their income during seasonal swings. Others rely on a steady flow throughout the year.
Company owners must plan for all business cycles, especially small companies. It’s a tough road when waiting for business partners to pay their bills.
We provide seven tips to get someone to pay your invoice on time.
1. Create Solid Business Relationships
In business, relationships matter. The American economy is a series of interconnected pieces. When one shifts, the rest of the pieces feel it too.
An increase in prices or interest rates makes the cost of doing business more expensive. It forces companies to make adjustments in their budget and business operations.
Higher prices for raw materials also impact a business partner’s ability to pay their invoices on time.
A study found that American corporations took 58 days to pay their supplier invoices in 2021. The action has a significant trickle-down effect.
Suppliers including small ones must wait almost two months before they receive payment. These funds help them purchase raw materials and continue their function within the economy.
If you maintain solid business relationships with suppliers, retailers, and manufacturers, you find out their financial position sooner. The information allows you to make adjustments.
Maybe you break deliveries into smaller portions. The action allows your client an opportunity to pay you in increments instead of a lump sum.
2. Make the Invoice Easy to Read
Most companies have an accounts payable department. They follow a process that pays their bills on time. In addition, the software makes the process more efficient.
New clients often pose a challenge. They don’t know how to read the bill. Plus, they need time to learn your billing process. Therefore make the invoice easy to read.
All invoices require the number, date sent, due date, and date of the original service.
It’s not necessary to make the information complicated. Pick a simple template that highlights the most important information. Make it easy to read for new and long-term clients.
3. Outline the Payment Terms
To get someone to pay your invoice on time, clearly outline the payment terms. Your business partner requires the amount due and the due date. List the forms of payments you accept and how they can submit payment.
Make the process easier by handing the bill to them promptly. Companies that deliver their product have the perfect opportunity. Hand the bill to the correct person upon delivery.
If you find yourself in a challenging financial position, invoice factoring is a viable solution. The process hands the responsibility of collecting debts to another entity.
4. Offer Incentives
In the course of business, you might come across a client who requires an extra nudge to pay their bill on time.
For example, some retailers offer customers a 20% discount on a purchase of $50 or more. The promotion guarantees them at least $50 in sales minus the 20% discount. However, it puts them in a better financial position than selling $20 or $30 at a time.
Work the math and make some choices. It makes business sense to offer a 10% discount to a client who pays their invoice 5 days before it’s due.
5. Send a Reminder
Some clients require invoice due reminders. Others pay their bill a day or two before the due date. Learn your client’s habits.
Some operate on a 30-day cycle. Therefore they pay all their invoices accordingly. Some stack their bills and pay them on the same day, such as the first day of the month of the 15th.
6. Invoice the Right Person
The accounts payable department stays busy. Plus, they have several checks and balances placed on them. If money goes missing, the first place investigators and auditors look is this department.
If you want your bill paid on time, ensure that it reaches the right person. Whether it’s paper-form or electronic, invoice the correct person.
7. Skip Invoicing and Request Upfront Payment
If you find that invoicing clients don’t benefit your company, it’s OK to make a switch. Invoicing doesn’t work for all companies, especially small ones.
The process adds an extra step to the payment processing process. No rule stating that invoicing is required exists. Researchers believe that invoicing dates back to the days of Mesopotamia.
However, those not comfortable with the practice can work with business partners who pay their bills upfront.
To encourage clients to pay their invoices on time, employ several tactics. A strong relationship is the first step. Ensure that new customers understand your invoice. Plus, clearly outline the payment terms. If invoicing becomes too challenging, consider working with clients who pay their bills upfront.