Making sure you’re paid quickly is an absolutely integral part of good business management
As the MD of Xero UK, I’m only too aware of the importance of getting paid on time by your customers. When I first started running the company back in 2009, the need for good cashflow was really underlined to me – you can’t underestimate the potential frustrations and issues cause by late payment when you’re a new start-up venture, or even a post-startup business like Xero.
When customers don’t pay on time, the business is at risk of not having enough money on hand to pay bills, payroll and other vital expenses. So, how do you make sure you’ve got a healthy cashflow with a consistent flow of money coming into the business?
The good news is there are plenty of steps you can take, as a small businesses owner, to encourage prompt payment. On behalf of our customers we were able to analyse our accounting engine to track over 12 million invoices and uncovered some secrets to getting paid on time.
So here are our top tips for getting better cashflow in your business.
1) Across those 12 millions invoices we saw that no matter whether you give seven days credit or 30 days
2) The majority of all invoices are paid two weeks late so think about shortening your payment due date. A late payment that arrives a month after a job’s finished is better than a late payment that arrives 90 days after a job’s finished.
3) Talk about payment terms with your customer right from the start. It sets expectations and prevents
confusion later on.
4) As soon as you’ve finished the job, send the invoice out. The sooner the customer gets your invoice.
5) The sooner they’ll pay you. Modern invoicing and accounting software should give you a mobile app to do this task on your smartphone.
6) Send your invoice directly to the person who can get you paid. Find out their name and department.
7) Don’t let the invoice get lost in the customer’s internal mail systems.
Keep track of who owes you money and follow up with them on a regular basis. Sometimes just picking
8) Up the phone or dropping them an email is all it takes to get an invoice settled.
These tips are just a few of the many ways you can proactively improve your payment results. There are lots of other invoicing best practices that can help your small business maintain a healthy cashflow. But the two really key elements are:
By talking to customers and creditors regularly, having great records on whose payments are outstanding and chasing the right people in their accounts payable teams, you’ll soon have a regular and consistent cashflow.
You can get more advice on improving your cashflow in our Xero Small Business Guide ‘Invoice Payment Terms: Top 7 Tips’.