10 Tips to Help Small Businesses Get Paid Faster

–By Jamie Sutherland

No matter what size or type of business you own, getting paid on time is critical to make your accounts-payable deadlines. Whether you’re a retailer buying and selling products, or a service agency employing contractors; all businesses require good cash flow management.

If you don’t have cash coming in on a regular basis, your business can be severely disrupted or even grind to a halt.

Of course, sometimes that’s just the way it goes; the business opportunity wasn’t there or the market changed, and you’re forced to change with it. Such was the case with digital entertainment altering the music and home-entertainment industries. Structural changes can lead to consolidation for some businesses, closures for others, and pain for small business owners, their staff and families.

Cash Flow Killers

However, what is perhaps even more unfortunate is having a business you know is profitable — the numbers add up, you have the skill set and you enjoy the challenges — but due to factors that seem outside your control, the cash isn’t coming in on time.

Ironically, this situation can be driven by sudden business growth that puts stress on your capital and your capacity to gear-up quickly. It can also be a result of seasonal volatility or hidden issues in stock management. Or, just possibly, it could be related to issues surrounding your invoicing process. The good news is that invoicing issues can easily be resolved.

A recent survey we conducted suggests that the number one mistake that small businesses make is a lack of ongoing insight into their cash flow. Getting bogged down chasing their customers again and again is not only distracting, it’s a waste of valuable time and resources that reduces the profit margin of the products and services sold.

We know of one small business that had more than $20,000 in outstanding invoices. Some of these invoices were with large companies that have full-time accounts-payable departments to administer payments. To make matters worse, this particular business had its credit card frozen for non-payment, since it didn’t have the funds to cover its costs.

Many small businesses go through the same thing and end up in a vicious circle of chasing payments when they should be getting on with what they do best — growing their business.

No small business owner wants to be in this situation. If you feel your business is heading in that direction — or worse, it’s already there — then it’s time find a way out. Here are 10 easy-to-use tips to help you get your money.

10 Invoicing Tips for Getting Paid Faster

1. Set your own payment terms, including invoicing dates and due dates.  Account for the fact there will be, inevitably, late payers.

2. Be clear with your customers about your terms. For example, you may require a signature on estimates, and include due dates in every written communication with your customer.

3. Inquire about your customers’ payment cycles before engaging, and ask them if they want to be invoiced 100 percent upfront. Sometimes they are trying to push through allocated budget towards a quarter-end or year-end, and they would welcome this structure.

4. Keep a detailed record of the services done or products supplied — including any inventory used and time to be invoiced.

5. Make the invoice absolutely clear and easy for the person making the payment to understand.

6. Address the invoice to the person making payment. Ask for a secondary contact in the event that the primary contact is out or on vacation.

7. Invoice as soon as possible after, or as products and services are supplied.

8. Try using late-payment fees or prompt-payment discounts.

9. Have a timely system of reminders, monthly statements and phone follow-ups.

10. Use an accounting program that connects directly with your bank account. Online, a.k.a. cloud, services offer up-to-date information anytime, anywhere on any device. That makes it dead simple to see what money is coming in, what money is going out, and it gives you the capability to track (and follow up on) those overdue payments.

Jamie Sutherland is the president of U.S. operations at Xero.