One of the primary challenges of running any business is managing your cash flow effectively. This is not always an easy task and customers not paying on time can make it even harder. Nearly half of all invoices are paid late, which is a staggeringly high figure, and chasing all these overdue accounts can be very time consuming.
Thankfully, Swipen has some helpful hints and tips, and our Virtual Terminal gives you several ways to encourage customers to pay on time, without compromising your relationship with them.
Make your invoices very clear:
It is important to ensure your invoices are very concise – they should contain the exact and up-to-date information about your payment terms, how much they owe you, when that amount is due, when it will be considered late, and any late payment penalties. It’s best to leave no room for misunderstanding.
Discount for early payment:
This is a great option if it suits your business. For example, a 5% discount if they pay within 7 days may encourage a customer to pay earlier.
Ask all brand new customers to pay upfront for their first order:
This works well if your business offers repeatable services or products. It gives you a chance to get to know a customer before you offer credit terms. It also gives you a chance to be introduced to the person in charge of paying your invoices, so you can build a rapport with them.
Offer payment in instalments:
Swipen’s Virtual Terminal allows you to set up recurring payments so customers can pay an agreed amount every week or month until settled. This can be a great incentive for a customer who otherwise wouldn’t be able to outright afford your product or service, or has been unable to pay your invoice in full as originally agreed.
Make paying your invoice easy:
Swipen’s Virtual Terminal allows you to send pay-by-link URLS and single-payment QR codes, which can be attached to emails or electronic invoices. Customers then have a variety of ways to pay, including card payments, open banking, Apple Pay/GooglePay or via a platform like PayPal. A single-payment QR code will also alert you to when the customer has received your invoice, when they’ve opened it and when it’s been paid.
Send regular reminders:
Life is busy and customers will naturally prioritise other things over paying your invoice. They may even simply forget. Regular and polite reminders are the best place to minimise forgetful or busy customers. Swipen’s Virtual Terminal can help you send reminder emails that contain an easy pay-by-link URL or single-payment QR code.
Apply penalties for late payment:
This may not suit every business, but it’s worth remembering that if, for example, you’re offering customers up to 30 days to settle an invoice, you are providing free credit. If they do not pay on time, unfortunately it may be necessary to apply a penalty. A 5% increase on the bill for every 7 days overdue can be an effective deterrent. Just make sure your payment terms are legally binding and any late payment penalties are made clear from the very first invoice.
Shorten the time you give to settle an invoice:
Sometimes, simply changing your payment terms from 30 days to 14 days can make a real difference. 30 day settlement harks back to the days of snail mail and payment by cheque. In the modern world, however, with electronic forms of payment making the cheque obsolete, there’s no reason why you shouldn’t be paid within a week or two. Almost 75% of invoices now request settlement within two weeks, so you won’t be alone.
Don’t break your own payment terms:
This can be the hard part. We all understand that sometimes it’s necessary to offer a customer a grace period in exceptional circumstances, and rightly so. But, in general, it’s important to stand by your payment terms.
Sometimes, even though you’ve done everything right, you may have to turn your customer over to a debt collector or lawyer. Ensure you keep detailed records of all invoices, emails, and phone calls to and from your customer to make your case is as airtight as possible.
Most businesses will spend around 10% of their time generating, sending and chasing invoices. If you’re a small business, you may even be left doing this yourself. Having an efficient system and payment terms that work for you can make all the difference. It frees you up to do what you do best, and what’s good for you is good for your business.
Forward to next Payments Parlance post – What is Virtual Terminal? MOTO? & Pay-by-Link?