There’s nothing more frustrating than providing your clients with a world-class product or service, only to be met with procrastination when it comes time for them to pay the invoice.
Cash flow is the lifeblood of your business, which is why you need to figure out how to get invoices paid faster. We’re here to help with some of the top tips on speeding up your invoice payment process to reduce your days sales outstanding (DSO) and past due receivables.
From fine-tuning your invoices to requiring deposits, incentivizing early payments to penalizing late payments, setting up recurring billing when possible, and automating the invoicing process altogether - there are a number of ways you can get paid faster.
The best part? All of this becomes effortless when you leverage our accounts receivable automation software here at InvoiceSherpa. We designed our billing automation system specifically for businesses struggling with slow payments. Find out firsthand why it’s the best AR automation software today!
Before getting into our tips on how to get invoices paid quicker, let’s quickly touch on the importance of speedy payments for small and midsize businesses. This requires an understanding of why cash is important to a business.
So, how do cash flow problems usually start? Delayed payments!
This can restrict your ability to cover day-to-day expenses such as payroll, rent, and supplies. Moreover, it can prevent you from executing strategic investments to grow your company. It also makes accounts receivable forecasting tougher, as there is a lack of consistency in your payment frequency.
Slow invoice payments also create administrative headaches, as staff must direct time towards following up on unpaid invoices, sending reminders, and managing collections. This can prevent them from focusing on core business activities, cutting into productivity.
It’s not uncommon for delayed payments to slowly but surely strain client relations, either. Consistently chasing clients for payments can create tension and may damage the professional relationship. Both parties end up frustrated - you feel like you’re being wronged, and the client might feel harassed.
Fortunately, you don’t have to just deal with slow payments and all the repercussions that follow. We’ll walk you through how to get invoices paid faster below so you can put this problem in the past.
So, how can I get clients to pay faster? The simplest solution is to rethink your invoicing process, harnessing the benefits of AR automation. Here’s how you can do that to get paid faster.
Clearly communicating payment terms from the moment you form a new business relationship sets the foundation for timely payments. Include specific details such as due dates, accepted payment methods, and any penalties for late payments in the contract and on each invoice.
Use simple, direct language to ensure that clients understand the terms. Phrases like “Payment due within 30 days” or “Late fee of 1.5% per month on overdue balances” should be clear. Reiterate these terms on every single invoice you send, that way there is no uncertainty.
Similarly, you should upgrade your invoice formatting. A well-designed, professional invoice is easier for clients to read and process. Use a clean layout with clear headings, itemized lists of services, and a summary of charges.
Avoid cluttering the invoice with unnecessary information that might distract from these key points. Provide clear contact information in case the client has questions or needs clarification.
If you’re looking for inspiration, we have created some templates for different types of businesses, including our legal invoice template, lawn care invoice example, and landscaping invoice format.
Taking a payment deposit upfront is a great way to reduce the risk of late payments, especially for new clients or large projects where the financial risk is higher. Even if the payment does end up being late, you’ll at least have some cash to cover day-to-day expenses.
You could even consider setting up a payment schedule with milestones for long-term projects. This could involve an initial deposit, followed by payments at various stages of the project. This helps maintain cash flow and ensures that you are compensated for work as it progresses.
Send invoices as soon as the work is completed or the product is delivered. The longer you wait to send your client the invoice, the longer it’ll take to get paid after all. Prompt invoicing also shows professionalism and efficiency.
This is one of the best accounts receivable automation use cases. You can set up a system for regular invoicing and follow-ups, which will fire off invoices as they’re created without you having to actually send them!
The more friction you can eliminate from the payment process for your clients, the quicker you’ll get paid. That’s why one of our top tips on how to get invoices paid faster is to provide more payment options.
Accept credit cards, bank transfers, electronic payments (e.g., PayPal, Venmo), and checks to accommodate different preferences. Better yet, provide an online payment portal where clients can view and pay their invoices to streamline the process.
If you’re really struggling with getting paid on time, it may be worth offering incentives for early payment. For example, a modest 2% discount for payment within 10 days (2/10 Net 30) can incentivize clients to pay quickly.
Just make sure whatever discount you’re offering is not so large that it cuts into your profits, otherwise, it won’t really be worth getting paid quicker. Carefully calculate the cost of offering discounts versus the benefit of improved cash flow.
Rather than rewarding good behavior, you could punish bad behavior by charging the maximum late fees by state. This is often more effective than the previous tip.
You need to ensure you clearly state the late fee policy in your payment terms, though, so clients are aware of the consequences of late payments. We have advice on the invoice late fee wording in our blog.
As far as how much to charge, we recommend a graduated late fee system where the fee increases over time. This can provide an additional incentive for clients to pay as soon as possible to avoid higher charges.
Sending out a demand for payment letter manually is time-consuming and frustrating. Instead, consider automating the payment reminder email process.
Even though the reminders are automated, you should still personalize them as much as possible. A friendly, personalized reminder will be more effective than a generic message.
Send reminders through various channels, such as email, SMS, or even postal mail. Multiple touchpoints can increase the chances that the client will see and act on the reminder.
Again, reducing friction from the payment process is the best way to get paid faster. So if you have a subscription-based business model, consider setting up automatic recurring billing.
This ensures that payments are made on time without requiring manual intervention from either party - everyone wins! Just make sure the client themselves consents to having their card billed on a regular basis monthly.
The #1 piece of advice on how to get invoices paid faster is to invest in the best automated invoice processing software, InvoiceSherpa. But what is AR automation software, exactly?
It’s the use of technology to remove yourself from the invoicing process so you can spend less time stressing about payments and more time focusing on growing your business or serving your clients.
But more importantly, it helps you get paid faster. So, what makes InvoiceSherpa the #1 choice? Simple - it works! Our solution has helped businesses reduce past due deliverables by up to 25%, days sales outstanding (DSO) by 20%, and bad debt reserves by 15%.
The best part is you don’t have to do anything once it’s set up. You can sync with your existing accounting software in just a few clicks so that when clients pay their bills, AR reconciliation happens automatically.
You can even set up custom invoice reminders via email or SMS and determine the schedule you want to send them out to speed up payments. The system supports automatic payments as well. Clients get their own portal for 24-hour access to outstanding invoices, payment terms, and more.
Compared to accounts receivable management services, InvoiceSherpa is a fraction of the price. Our accounts receivable automation solution costs as little as $49/month, and you can get started today with a 14-day free trial.
So, learn more about how to automate accounts receivable in our blog with our tips on the accounts receivable automation best practices. Put the stress and frustration of late payments in the past as we wrap up our guide on how to get invoices paid quicker.
Prompt and efficient invoice payment is crucial for maintaining a healthy cash flow and ensuring the financial stability of your business. We hope this overview of how to get invoices paid faster helps you reduce the waiting game and fuel your business with better cash flow.
You can find more accounting tips in our blog, including how to calculate accounts receivable, unbilled receivables, how to send an invoice to collections, accounts receivable challenges and how automation can help, and more.
Otherwise, take the first step towards getting paid faster today with InvoiceSherpa. Automation is the key to speeding up the payment processes in your business, and our solution is the #1 choice online. See why for yourself with a free trial now!
August 8, 2024
