Do you find yourself avoiding looking at what invoices haven’t been paid by your clients yet?
You’re not alone. Chasing up unpaid invoices is difficult for most business owners, because they tend to have a close relationship with their clients and the thought of having to bring up the topic of unpaid invoices makes people feel uncomfortable.
Here are our 10 tips to help you get paid faster
1. Set clear payment terms upfront
I still receive invoices from suppliers – or from suppliers of my clients – that have no payment terms stipulated anywhere. Your clients are expecting a payment due date on their invoices – it’s part of doing business. By not having clear payment terms, you’re increasing the likelihood that you’ll be paid later than you intended. And increasing your own stress levels because you’re second-guessing when you should start chasing up payment. As well as adding confusion to your clients because they have to come up with a payment date they think you’ll be happy with. They may even put the invoice aside until they find the time to email you or phone you to confirm what your payment terms are.
2. Send invoices and statements electronically via accounting software
Many software packages, including Xero, will show you when your client has viewed your invoices. They can send out friendly automatic reminders for payment – and you can stipulate how often you want this to occur. It just goes on in the background without you having to think about it. Sending out statements promptly and regularly via your software will also help you get paid faster and on time.
3. Provide more than 1 way to pay
Consider integrating payment platforms such Stripe or GoCardless with your Xero invoicing. Consider purchasing a Square card reader or other type of card reader so that you can take payment at the time of providing the goods or services. Many people will happily pay invoices on the spot and earlier than necessary, if they can do it electronically and quickly then and there.
4. Ensure the information on your invoices is correct
Having vague descriptions, incorrect dates or missing/incorrect purchase order numbers makes it more likely your invoice will be set aside or even disputed and not paid at all. This ties in with No. 1 above – make it as easy as possible for your clients to pay you.
5. Be polite and don’t assume the worst
A friendly phone call or email is often all it takes to get payment for an overdue invoice. People are busy and sometimes they’ve either genuinely lost your invoice or forgotten to pay it. Sometimes they need more time or need to negotiate paying by instalments over a longer period of time.
6. Procedures
Create a procedure for chasing up unpaid invoices. Making these decisions upfront means you don’t have to re-invent the wheel every time a new invoices becomes overdue. At what point will you contact people? How will you contact them? Have an email template prepared. You can have a simple phone call script prepared and practise saying it out loud. Is someone else in your firm going to be responsible for these tasks? Will you withhold future services/goods being supplied? At what point will you do this (dollar value and/or time that has passed). How will you keep track of who has been contacted, on what date and what the outcome was?
7. Give incentives for paying early
Consider offering discounts for early payment.
8. Add deterants for paying late
Consider charging late payment fees or interest on late payments – or withholding future services/goods until payment is received. Make sure these terms are stipulated upfront in writing so that your client is aware that these are part of the conditions of doing business with you.
9. Deposits and up-front payments
Consider taking deposits upfront before starting work on larger jobs, and progress payments throughout the course of the job. Consider making payment upfront a requirements for all jobs – or just for new clients that you haven’t established a working relationship with yet.
10. Taking things further
Do you have a back-up plan in case the debt needs to be pursued further? There are add-ons that you can integrate with your software to do some of this work for you. There are also organisations such as debt collection agencies that will chase up unpaid invoices for you and help you with the next steps beyond that if necessary.
If you find yourself struggling to get invoices or statements sent out promptly to your clients, you might consider hiring bookkeepers to do your invoicing for you. They can ensure automatic reminders are set up in your software and set procedures in place for following up late payers.
About us:
Festival Bookkeeping are a team of Xero advisers and bookkeepers located in Adelaide, South Australia. We help busy business owners and their teams Australia-wide. You can contact us on 0421 501 887 or sarina@festivalbookkeeping.com.au
Learn more about our bookkeeping services here: https://festivalbookkeeping.com.au/services/xero-bookkeeping-packages/
Looking for more helpful articles about bookkeeping and accounting? Try https://festivalbookkeeping.com.au/xero-payroll-4-common-mistakes and https://festivalbookkeeping.com.au/20-tips-to-stay-more-focused-at-work/
Read what our happy clients have to say here: https://festivalbookkeeping.com.au/testimonials/
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