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The goal of any business is to generate profitable income through sales. However, dealing with overdue payment is too taxing and can introduce more challenges that inhibit growth. Worse still, reoccurring frequencies of unpunctual payments can affect a company's morale in the long term. Hence, it is essential to have a proactive plan for handling invoice and late-paying clients.
In an independent survey, it was found that 20% of global invoices are paid late. Postponing payments can become an inconvenience even for well-established enterprises. It is a problem that most organizations want to wish away because repeatedly nudging customers can negatively impact relationships and the spirit of business.
Our best paper invoicing tips which includes invoice automation, incentives, and much more will help your business to speed up the payment and lessen the frustration. Read ahead to know how.
13 Best Business Invoicing Tips to Save You from Hassles
Business's gripe against clients who are habituated to paying later than expected is that they get tied up with constant follow-up. A study says that regular follow-up could cut the rate of overdue payment by up to 47%. But repeat reminders aren't the only way. Our tips for setting up an invoice system will help you streamline payment collection.
Our 13 top paper invoicing tips to get paid faster is as follows -
Replace Paper Invoice with Electronic Invoice
Paper invoices can be a pain in the neck because it is vulnerable to loss, misplacement, or damage. Businesses need a reliable solution rather than a simple patch up in the process, ergo the electronic invoice. Switching to electronic invoice is the initial step towards invoice automation and can help shorten the payment time. It is a significant improvement over the limitations imposed by paper invoices.
Send Invoice Immediately After Delivery of Service
Sending invoice immediately upon delivery of service will drive a sense of urgency. It will impel clients to see work completion and consequent payment as a single step. Although the process isn't fixed, it will give clients a psychological impetus to pay all dues on time. Businesses that offer subscription services should automate invoicing for easy service renewal.
Keep Invoices Simple, Skip the Technical Terms
Refrain from prefixing payment period with "net" in the invoice. Although "net 30" indicates that 30 days until overdue, it can confuse some customers because they can be wrongly interpreted. Explicitly communicate the overdue date by mentioning "due upon receipt" along with the date when the reminder was dispatched.
Also, it is important to cover deadlines, terms, service cost, and other essentials in the service level agreement (SLA) before opening doors to services for the clients.
Incentivize People who Pay Ahead of the Due Date
Discounts and offers can act as a stimulus leading to the faster payment of dues. For example, an offer of a 5% rebate for clients paying their invoice under 15 days is an attractive incentive that will seldom go unnoticed. However, if the client owes a hefty sum of money, such offers may downplay the company's profit-making ambitions. But fret not, because we have more business invoicing tips and tricks to help you get paid on time.
Multiple Invoice = Multiple Reminders
Customers prefer a consolidated invoice with a breakdown of all purchased items. However, if you still want to pass on some of the rewards for timely payment without risking monetary loss, send multiple invoices instead of one. Now your clients will receive more reminders continuously prompting payment.
Adopt Payment-first Policy
If deferring payment is a routine and a chunk of your time is eaten away by the creation of payment reminders, categorize irregular payers into groups who would be served only after you get paid. The payment can be accepted in part or in whole. The point is to drive home the message that services will not be offered without payment and the policy is cast in stone. In time, such a move will prod customers to make payments without taking the longer path.
Impose Late-payment Penalty on Chronic Deferrers
Penalties can act as an eyeopener for people who do not play by the rules. Many experts say that imposing penalty could scare away clients and may even hurt the relationship with customers. But let that worry not get in the way of dealing with chronic deferrers.
Perhaps, when payments are overdue by 90+ days, penalties may be partially or entirely levied while those who pay before the permitted grace period can be spared from additional charges. In doing so, some customers who may have forgotten about the payment will not have to bear the penalty. Also, client relationship will remain unaffected.
Send Invoice at Predictable Intervals
Don't expect prompt payment unless you drive a sense of urgency and order in billing schedule (in the case of subscription service). If you are sending invoice later during the month than in the beginning, get ready to face a slow response. So, set up a policy that will allow clients to anticipate billing cycle at fixed intervals.
Send Advance Reminders before the Actual Invoice
Give clients sufficient time to ready themselves for the invoice payment. It is a norm for companies to send friendly reminder emails to clients in advance so that the invoice stays on top of their mind in case they forget about it. In this way, payments can be cleared ahead of the due date.
Provide Detailed Description Itemized Invoice
While creating bills ensure that all items are descriptively mentioned. It is imperative to make your customer aware of what items are being charged. When customers can clearly perceive why certain items bear a special price than others, they are less likely to dispute the invoice.
Cease the Work Until Dues are Cleared
Another way to deal with habitual late payers is to stiffen the stand against them by halting further service until dues are cleared. It's a gentle tap on the wrist without agitating customers altogether. Make your customers realize the value of timely payment for services by reminding them of the difficulty in offering service and better experience unless you get paid.
Audit Your Invoice and Payment Mechanism
As a business owner, it is essential to ensure that your payment gateway is free from glitches. Occasionally customers may prefer an alternate mode of payment or may even take longer to clear the payment. However, if a major portion of your client base follows the suit, it might be an indication of problems buried underpayment mechanism. One way to prevent customers from postponing payment is to conduct an audit of your payment system and invoices to ensure that any flaws that exist are caught and set right before it grows in magnitude.
Rethink Service Extension to Habitual Slow Payers
Sometimes chronic payment deferrers need to be dealt with stern action because they feel annoyed with multiple reminders and if you have failed to get possession of the payment, it is advisable to get in touch with them and discuss future of service renewal. If your customers can't see why it is important for you to get paid despite repeat reminders, it is safe to rethink the service extension.
Efficiently Handle Late Payers and Overdue Invoices by Following Our Top Tips
Although organizations prefer to avoid clients who chronically postpone payment, it is part of the business to audit invoice and follow-up with deferrers. To achieve a certain smoothness in operations, the onus is on business owners to keep invoicing system spic and span.
Seeing repeated emails can be annoying for recipients, so sending a barrage of reminder emails is a passive way to act against those who delay the payment. Start with a gentle nudge (reminders) and work your way up to verbal communication in case the client is unwilling to clear the dues despite repeated follow-ups. Businesses need not hesitate to deny further services until the payment is cleared.
Highlight the fact that you run business with an intent to make gains and deferred payment can come in the way of long-term goals. A client who can be reasoned with will step forward and mend their ways to make the future better for service providers and themselves as well.
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