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Are you getting the bills paid?

26th February 2019

Taking care of the business basics - part 4

Managing your payment process, from invoicing to getting paid, ensures you have cash in the bank. Having cash in the bank gives you a sense of achievement and progress. It’s the best of measure for keeping your business afloat, as well as your enthusiasm for the business. Knowing you have positive figures in your bank means that you have a business worth working on.

Here are some steps for a simple process to help you ensure that you are paid in full and on time:

Before you invoice

Always have clear and concise payment terms for your customers, whether you know them or not. Having differences at this point allows for people wrangle over the details. This should include when you expect to be paid and what will happen if you don’t.

Give your payment terms to every customer before they buy (and, ideally, get them to confirm in writing that they accept them), and have them displayed in your office/workshop/shop so that both customers and your staff know exactly what to expect. That way there are no hidden surprises for anyone and no misunderstandings when the invoice arrives.

 

Invoicing

Raising your invoices in a timely fashion is always a good idea. Do this consistently, and customers know what to expect from you. Doing this within 48 hours, say, ensures that you both remember the details of the transaction.

Make it clear what the invoice is for (just writing "Goods" on an invoice, for example, may seems faster at the time, but once you've had to deal with a phone enquiry and had to hunt out original paperwork, you realise that it is far more time consuming in the end). Give dates, items, prices, any reference numbers and VAT being charged. It all makes it easier for your customer to pay you.

After-care

Good business practice always includes keeping in touch with your customers throughout your relationship, and invoicing is no different. Give them a call after 48 hours to ask them if the invoice arrived, and if there are any problems.

This part of the process gives you the opportunity to iron out any potential issues, and your client the knowledge that you value the transaction.

If the money doesn’t arrive on the due date, your positive relationship with the client will help here: call the following day to remind them. Don’t go in heavy here, they will probably have forgotten and will apologise and pay at once.

Disputes:

If payment still doesn’t arrive within a further 10 business days, writing to your customer is the best course of action. Again, your letter/email should be the same as to any client – polite but firm.

Have a template that you can add in details to. It should include reference to your terms and conditions, and the consequences of non-payment. Continue to be polite, you don’t want to burn bridges just yet, but consider stopping further business with them until the payment is settled.

Although I’ve advised here to treat all customers in the same polite, firm and timely manner, it also serves you well, especially for larger contracts, if you consider before-hand checking their credit and asking for a deposit or advance payment that will cover your costs.

Dealing with persistent late payers can be tricky, but consider putting them on tighter terms than prompt payers. If they are really bad at paying you then you could even ask for payment in advance. This means you aren't left out of pocket or having to constantly chase them for payment.

If you would like us to review your current invoicing practices, you can book in for our free Performance Measurement and Improvement meeting to see how we can save you money and improve your business practices.

 

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