Use these Strategies for getting paid faster

Picture of Steven Nicholson
Steven Nicholson

August 4, 2023

Cash flow is the life blood of any small business and managing it is the most important task of any small business owner. In an environment of rising labour and energy costs, together with other inflationary cost pressures, it has never been more important for small businesses optimise every aspect of their cash flow management. How quickly you can get paid by your customers can have a substantial impact on your business cash flow, so here are our most effective strategies for getting paid faster. 

1. Set clear expectations 

It is important that you set standard terms that are right for your business and that your customers know what your terms are. The following should be clearly set out on your invoice template: 

  • Payment due date – state this clearly on the invoice. Your accounting software can calculate the exact date payment is due from the date of invoice so use this option rather than a general ‘net 7 days’ which is open to interpretation. Also, don’t be too generous by offering 30-day terms. You’re not a bank, so don’t offer free credit. Remember that the aim is to get paid as soon as possible. 

  • Payment methods accepted – thankfully, the days of ‘the cheque’s in the mail’ excuse are well and truly behind us, so make sure that the only payment methods you accept are quick and frictionless for your customer. Ensure your bank account details are clearly stated on all invoice templates as this saves the customer searching their records for it. Also, consider adding a ‘Pay Now’ button to online invoices. Xero accounting software has a number of payment services available: 

    • Stripe – accept credit and debit cards, or digital wallets like Apple Pay and Google Pay 

    • GoCardless – automatic direct debit payments 

    • PayPal – allow customers to pay you using their already set up PayPal account 

    Each of these will come with its own transaction fees, so it is important to consider carefully with your bookkeeper or accountant. However, for a small percentage of your invoice value, getting paid quicker is often of greater benefit.

  • Late payment fees – include this clearly on the invoice. You are within your rights to charge a late payment fee as long as it is reasonable to cover the loss your business has incurred by not being paid on time. It is common to charge a percentage of the debt outstanding, calculated at 1-2% above the rate your bank charges you for any loans or overdraft. It may well not be something that you charge for every overdue amount, but highlighting the possibility when sending a payment reminder may well lead to getting paid quicker. 

2. Invoice promptly and accurately

Since the introduction of cloud based accounting software and associated apps, it has never been easier to invoice on the go from a laptop or mobile device. These invoices will also be much more accurate as they can draw customer and product details straight from the program, making invoicing a fast and pain free process. There is no need to wait until the end of the week to sit down and tackle a pile of manual invoicing. 

Your accountant or bookkeeper should be able to recommend the best invoicing tools for your specific circumstances. 

It’s also a good idea to check with new customers particularly that they have received your emailed invoice. Such emails can often end up in the inbox junk file missing valuable days when they could be getting paid. 

3. Set up payment reminders 

Accounting software, such as Xero, allows you to set up invoice reminders to let customers know when they have missed paying an invoice by its due date. You can also set reminders to let customers know that payment for an invoice is approaching. These should be set up by your bookkeeper for all invoices. 

It is also best practice to send out monthly debtor statements to those customers with multiple invoices outstanding. 

Finally, don’t be afraid to call you customers with a gentle reminder when they ‘forget’ to pay on time. You have done your part and undoubtedly supplied an excellent product or service, so they should have no qualms with settling their account. 

4. Offer a discount for early payment 

The longer it takes for an invoice to get paid, the more it is costing your business in terms of admin time chasing the customer, the cost of an overdraft or loan to finance the cash shortfall and the lost opportunity cost of not being able to deploy those funds into growing your business. Taking these factors into account for your business, it may make sense to offer a small discount if invoices are paid early. The cost of the discount could pay for itself in terms of reduced stress from chasing debtors and from having better cash flow. 

Your accountant or bookkeeper should be able to calculate for you the cost of a discount and the pros and cons of introducing such a scheme. 

All these strategies are easy to set up and should already be part of your ongoing cash flow management. If you are missing any, speak with your bookkeeper or accountant and ask why they have not suggested them for your business. There may well be very good reasons why some of these strategies are not appropriate to your circumstances.  

Retinue Accounting offers an innovative subscription service that helps small businesses with all their bookkeeping, payroll and taxation needs, including strategies for getting paid faster, for an affordable fixed monthly fee. If you are interested in finding out more about how we can help you make better business decisions, please get in touch. 

Retinue’s payroll service includes the processing of hours and wages rates provided by you. We do not determine award rates for your employees or provide advice on the correct employment status of your employees. It is your responsibility to ensure that your employees are paid correctly and we recommend obtaining advice from specialised employment relations experts.

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