How to get paid on time, every time

For many businesses, credit control can be a big problem. It has a huge effect on your ability to grow – or even survive. A lack of cash flow is the number one reason businesses go bust. So you need to know how to improve your cashflow.

The best way to do that, regardless of the size of your business, is to make sure you get invoices paid on time. Here are a few steps to make sure that happens every time.

Have payment terms

Start the conversation early. You don’t have to go into great detail from the start, but get clarity on the subject of payment early. Ideally, you should have firm payment terms and get every customer to agree to them in writing before doing any work.

Your payment terms will need to be right for your business, but they might be something like “Full amount paid two weeks before delivery” or “50% deposit on order, the remaining balance paid within 7 days of delivery”.

Give credit carefully

If you’re going to give credit (i.e. do work in advance of payment), only give credit to people who are credit worthy. It’s easy to get very excited about your next big order, but it’s worthless if you never get paid for it.

It’s easy to credit check with a reputable agency such as Credit Safe. Set the credit limit provided by the agency and stick to it!

Invoice correctly & promptly

Don’t give your customers any excuses not to pay you. Every invoice needs to have:

• Your details
• Your customer’s details
• Any purchase order/reference numbers
• Total amount due
• The due date
• How they can pay

Ideally, you want to provide more than one option for payment. If the only option you provide is Paypal, you’re making it harder and giving people an easy excuse not to pay. Bank payments and standing orders are the most cost effective and easiest way to get paid and improve your cashflow.

And send out invoices as soon as you’ve delivered. It might seem sensible to do all your invoicing at a set time in one go, but it’s rarely a good idea. Get the invoice in front of them while the work is fresh in their minds.

Follow a Credit Control process

This will depend on your circumstances, but I can give you something to start from.

1. Send out the invoice.
2. On the due date, send a reminder the invoice is due today.
3. 15 days later, send a reminder the invoice is overdue.
4. 15 days later, give them a call and ask for a payment date. Confirm the outcome of that call and the payment date in writing.
5. 15 days later, call again and confirm in writing.
6. 7 days later, send a letter on red paper informing them they must pay by a deadline or further action will be taken (be specific with your further action e.g. debt collection agency). Also send this via email.
7. On the deadline you set in the previous step, take whatever further action you said you would.

That might seem a quite intimidating thing to do. That’s a great reason to outsource. Outsourcing this process also allows you to stay friendly while someone else gets firm with your customers.

Sort out queries quickly

Queries on invoices are not uncommon. They’re perfectly normal, but an unresolved query is a reason for a customer not to pay. It may only be a query on a tiny amount, but most people will not pay any part of an invoice until it’s resolved.

Get that query sorted immediately and don’t give your customer an excuse not to pay you.

Review regularly

As with any aspect of business, it’s important to check what is and isn’t working regularly. Things can change very quickly; a customer might be credit worthy one day and a bad risk the next. Don’t assume a customer who has always paid well will continue to do so. Monitor them, and if they stop paying well, take immediate action. You don’t have to take them to court right away, but get in touch with them.

Existing customers can often be more of a payment risk than new customers. With new customers, we’re actively aware of and managing the risk that they won’t pay. We are more likely to let existing customers get away with more than they should; sometimes, that’s simply because we don’t notice they’ve stopped paying. Reviewing regularly makes sure you stay in control.

If you do all of these things you massively increase your chances of getting invoices paid on time, every time.