Did you know it’s estimated that Aussie small businesses are owed around $155 billion in outstanding invoices? That’s a lot of your hard earned cash, and the funds that SMEs need to not only keep their doors open, but continue to grow.
If you’re already running a small business, chances are you’ll have experienced this in one way or another before.
Or, if going out on your own is on the cards this year, it pays to develop some strategies before you launch, to avoid the headache associated with chasing late payments while getting your biz off the ground.
Formalise those payment terms
When you’re at the proposal stage or onboarding a new client, make it clear to them not only what your fees are, but what’s required when it comes to paying those fees. These include things like the amount of time your clients or customers have to submit a payment, and the methods that they can or must use to do this.
Contracts are key here, as it ensures both parties are on the same page, and that they agree to the payment terms. Hopefully this won’t ever be the case, but this will also be an important document to refer back to in the event a dispute arises.
Consider automated payments, they could be your saviour!
A lot of the time, late payments aren’t a reflection of the quality of your product or service, or the result of an unhappy client. We all get busy, and while getting paid is important to you, sometimes these things fall off their radar.
If you’re a service-based business working with clients on retainer, or a customer purchases the same amount and type of stock from you each month, establishing automated payments could be a no-brainer. It means you’re paid on time, and customers don’t need to worry about manually making payments each period.
There are many merchants out there that provide this service, such as GoCardless, EzyPay and PayAdvantage. Their models and pricing vary, so do your research to work out which option will suit the unique needs of your business.
Explore the beauty of integrations
I’ve discussed the importance of investing in bookkeeping software (check out our guide if you’re not sure which one to go with) for a range of reasons in previous posts, and in good news, the main providers integrate with a range of other useful tools.
Offering these as an option on your invoices can speed up payments as it’s quicker for clients to process them, and they’ll often see value in the points they’ll accrue on their respective credit cards. It’s a win win, but as always, do your research to decide which platform will work best for you.
Weave incentives into your invoices
Offering slight discounts when customers pay an invoice before the due date is a great way to encourage early payments, just make sure you account for these when developing your pricing model).
At the same time, including late fees as a clause in contracts will help to protect you and your business. This could be, for example, a 10% fee for each payment period that the invoice is late. No one wants to pay more than they have to, so the aim here is to encourage on time payments, so that late fees don’t need to be applied, and you maintain a positive relationship with your client or customer.
Keep the communication going
Communication is so key! As I mentioned earlier, sometimes people simply forget to pay invoices. The beauty of bookkeeping and accounting software is that you can set up automatic reminders, and personalise the message so you’re not seen as coming across abruptly.
It might sound old school, but if you’re struggling to secure a payment, don’t be afraid to pick up the phone. There could be something going on behind the scenes that you don’t know about – such as the fact that a company’s finance team is short staffed – and talking the issue through, while also securing a payment date, can prevent any miscommunication.
Whether late payments are an issue or you’re struggling to get those finances in order, I’d love to learn more about your business and goals for 2022.
Book a free consultation here and let’s get talking!