5 tips to get paid faster

Coming up to tax time, it’s possible some clients and customers might delay making payments on invoices for longer than normally is the case. This can hamper those small businesses looking to use those funds to invest in growth or expansion, or even prepay expenses ahead of the new financial year to take advantage of tax incentives.

Encouraging the prompt payment of invoices can therefore boost cash flow and set businesses up for growth – so here are five practical ways to get paid faster.

Tip #1: Clarify payment terms

It’s no use expecting clients or customers to pay promptly if you don’t make the payment terms they’re agreeing to clear upfront.

Communicate in writing at the time of engaging a client when you expect payment – on a specific date, for example, or within an agreed time frame after the completion of services – and lay out what occurs if payments are not made on time, such as late fees.

Ensure all of this is outlined in writing to minimise the risk of misunderstandings down the track.

Tip #2: Request a deposit

An easy way of bringing money in sooner is to stipulate a deposit.

Overall, you’re still earning the same amount, but having part of that amount in your account at the start of the process means you can channel it into another part of the business sooner and boost your overall cash flow – without needing to wait until a project has finished.

With a deposit, you could get started sooner on that long-awaited expansion plan or new product offering.

Getting invoices paid earlier isn’t the only way to boost cash flow – talk with a Prospa specialist about how a Prospa Line of Credit could help.

Tip #3: Issue smaller invoices more often

Another way of getting paid faster is by asking for milestone payments – which essentially spreads the full payment amount out time.

For instance, in addition to a 25% deposit, say, you could charge a further 25% at the project’s midpoint followed by 50% upon its completion.

Tip 4: Chase unpaid invoices straight away

It’s worth following up unpaid invoices immediately, both to get paid sooner and to encourage good habits among clients and customers.

You could use your accounting software to automatically create a reminder email once the invoice is due, and then follow that up after three or seven days with a personal phone call.

A little extra administrative effort can go a long way, and minimise the chance the unpaid invoice becomes a protracted issue.

Tip 5: Implement a late fee

If you’re frequently chasing unpaid invoices for far too long, discourage late payments by introducing a penalty, such as a set percentage for payments overdue by 14 days.

You may need to amend contracts and make sure you legally can apply late fees, but even if you never actually charge any late fee, the knowledge that a late fee might apply can act as a deterrent for tardy payers.

If you would like to understand these tips better or are unsure about how they might apply to you, reach out to a small business accountant.