Top tips on how to make payment processes much more efficient
Managing cash flow as a small business can be one of the most challenging tasks you will face. Not only do you have to keep on top of your income and outgoings, but you need to make sure you receive the money you are due at the right time.
Firstly, consider whether you might be able to get paid immediately. Depending on the nature of your business, you might be able to take payment there and then using a card terminal. It may also be an option to process card payments via a virtual terminal without the customer needing to be there.
Sizeable organisations usually have a 60 to 90-day payment term as standard, so if you are working with a big business then consider how quickly you need payment and see if you can negotiate a shorter payment term if necessary, 30 days is the norm. Alternatively, there are a few things you could consider to ensure you get paid on time…
Do your research
You may have set up a great relationship with a new client, for example, but how much do you really know about them? Carry out your research before extending credit to them. To be sure you’re dealing with someone who can pay into your account quickly and efficiently, there’s the option to carry out a credit check via a credit rating agency. You could also ask for references from existing clients.
Another good tip is to take a more proactive approach – send out your invoices as soon as possible – after all, “the shorter the delay in invoicing, the shorter the wait to get paid.” There’s also the option to implement a Pay by Link service. Simply add a special web link to your customer facing email and receive alerts when a payment has been sent to you.
There’s a great deal to be said for following up, too, and not just once, but however many times it takes until you receive payment. Send out an issue statement on the first day of every month to remind clients of upcoming and pending invoices. As a general rule of thumb, you should follow up one week after sending out the invoice, this can be done either via email or phone call, but it’s advisable that you phone, as this is more likely to speed up the process/create a sense of urgency.
If there’s no payment three to four weeks after sending out an invoice, then consider sending a formal letter, but be conscious of sustaining a good relationship between yourself and the client, as you definitely don’t want this turning sour at any stage, especially if you’re wanting to do more business with them in the future.
A client who is hesitant to pay up may be spotted by the excuses they relay to you. Be wary of things like, “it’s in the post” or “it needs two signatures and the other person is on holiday at the moment”. There is a chance the client is being truthful, though, so read the situation carefully, and if you do have an inkling that the client isn’t holding up their end of the deal then don’t be afraid to ask questions.
Late payment can be crippling to your business, so be sure to stay on top of things, but remain polite and patient. Keep all communication lines open – you’re sure to find that things will run a lot more smoothly between yourself and the client.
Don’t be afraid to ask for your money
Research by Satago suggests that a third of all small businesses are reluctant to chase or ask for late payments. So be persistent, remain professional, ensure that you’re on top of your accounts and keep your business’s finances healthy.