Small and Medium sized businesses often have a severe cash flow problem. A good cash flow can keep a business afloat for an extended period, while a poor flow can cause all sorts of monetary problems.
Late payments and overdue invoices are an epidemic in some countries. In the UK, for example, 60% of all bills are paid late, six days late, on average! In the US its seven days, and in Australia, the worst of all the tracked countries, it is as late as 26.4 days on average. Very few countries manage an average of “on time” or earlier.
[ MarketInvoice – State Of Late Payment Study ]
Preventing Overdue Accounts
There are things SMBs can do to protect themselves from late payers, and late payments. It does not guarantee that payments will be made on time, but it will help lower the odds of late payments. There are just a few guidelines you should be following:
Let your clients know
It might sound basic, but just ensuring that your client understands the terms and the due date on their first bill goes a long way to getting paid. In fact, they should be reminded of the terms of each bill until it becomes a routine for them.
Don’t skimp on the details
Your invoice should have something detailing what is being invoiced, something to clue the client in. It is harder to not pay for a “Porcelain Girl with Red Rose Trim,” because they can see it stocked on their shelves, than it is “Item 1564-4564”. Include any information their billing department requires such as a PO number or ordering employee ID.
Send the bill to the right department
Beyond the right department, the right employee. The person who’s ordering may not be the same person who’s paying!
Be flexible in the type of payments you allow
By adding electronic payments, or any other kind of payment method for that matter, you decrease the chances of having to turn away people who are ready to pay now. In fact, electronic payment collection is beneficial since you can attach a ‘pay now’ link to every email or SMS reminder that you send. People are much more likely to pay when the ability to do so is regularly placed right in front of them.
On the due date, or even prior, if a payment has yet to be remitted, there’s nothing wrong with issuing a follow-up and payment reminder. Further to this, a friendly email to their accounts payable department, when overdue, is not an uncommon practice.
Software exists to help do 5 step follow-ups on overdue accounts automatically. Take IODM for example, a cloud application that automates your “invoice chasing in 3 simple steps”. It can email or text overdue clients, on a seven-day cycle, to gently remind them of the outstanding invoice. It will also automate the process of notifying debt collectors on your behalf, and give you automated reports on its progress!
While collecting money is vital to a small business survival. Why dedicate precious staff-hours to something that can be automated. Use those saved hours to build relationships with new or already-paid clients!