Want to get paid on time: Here are 9 things you need to do now

Want to Get Paid on Time: Here Are 9 Things You Need to Do Now

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If you want to take control of your business, ensuring you get paid on time is crucial.

When you sell something in your business, you create credit. The only real exception is retail stores, where payment is instant.

However, when you create a loan, you have to wait for payment. And most likely you will chase that payment.

It can be painful.

But for your business, life doesn’t have to be like that.

Want to know how you can make your life easier and your clients’ lives easier, especially during these unprecedented times when talking about money can be difficult and sensitivity can be helpful?

In this article, we’ll outline nine ways to prevent your business from getting into trouble due to debt.

They’re easy to implement and used by businesses across the UK – so why not give them a try?

Here’s what we cover:

Is visiting a customer’s premises part of your company’s activities? If so, why not demand payment when the work is completed or the goods are handed over?

You can do this with a debit and credit card reader.

These are available through companies like Square, SumUp, or iZettle to pretty much anyone who wants one.

These devices connect to your cell phone and authorize the payment instantly.

Typically, you pay a small amount to purchase the card reader and then a percentage (usually around 2 to 3%) for each transaction.

If you are concerned about these costs, you can increase the fee to cover the fee.

When you use accounting software, not only will you be able to issue and send invoices with just a few clicks, but you’ll also receive reminders when it’s time to catch up (i.e. when the deadlines you agreed upon have passed).

And again, if you use software, it’s easy to catch up on the bill after notification.

Compare this to handwriting invoices or printing them out in Microsoft Word or Excel. It’s much harder to keep track of when bills are due.

And even if you create a separate list, it will slow you down and leave you with less time to do what you love – finding and delighting customers with your products and services.

Let the software take the burden.

If you issue invoices electronically using accounting software, you can add a payment link at the end of the invoice.

This makes it incredibly easy for the recipient to pay via platforms you may already use, such as PayPal, although there are dedicated services for smaller businesses such as Square and Stripe.

Last but not least, this makes it easier to talk to your customer or client when you follow up on a payment.

Instead of having to explain how you’re paying (e.g. providing your bank transfer details), you can simply say: “The details can be found at the bottom of the invoice I sent you.”

This can be an oversight for many companies.

An invoice should be an A4 sheet and contain only the necessary details. This includes a unique invoice number, your name and address, a description and payment terms.

If you are VAT registered there are some legal requirements – but again, things can and should be kept as simple as possible.

It is not necessary to indicate your terms and conditions on the invoice. However, it is advisable to provide a link to it if it is an electronic invoice (or a URL if it is a printed invoice).

And you don’t have to include a cover letter.

Here’s a neat little trick you can try.

Make it clear to your customer or client that if they pay within 10 days they will receive a 20% discount on the invoice amount.

This can only encourage timely payment. And you have two options to finance this discount:

  • In return for the time you may save tracking payments, you will receive a 20% cut
  • They increase the standard price by 20% with the aim that this early payment will almost always result in a discount.

Yes, that’s a bit like charging interest for late payments. But for the customer or client it doesn’t feel that way.

It’s more of a carrot and stick approach rather than chasing and having to have difficult conversations when you haven’t received your money.

Try sending your customer or clients a weekly statement detailing how much they owe.

This feature may be built into your accounting software. Making such a statement means that clients or customers simply cannot forget what they owe.

And make it clear in your terms of service or contract that this is a blanket policy that you apply to all customers and that you are not singling out any one customer or client.

Here’s a tip: Don’t schedule this task for a Monday or Friday. At these times you are probably busy with other things.

If the customer or client uses you regularly, you can ask them to set up a direct debit. This can be facilitated through a payment provider such as GoCardless.

Yes, direct debit can even be used by companies for payments.

You are probably thinking that this can only be used if your customer or client makes regular payments to you. This is what we learned from using direct debit for utility bill payments.

In fact, direct debit can also be set up to collect irregular and on-demand payments. For example, many people use PayPal, and that’s exactly how it works in the UK.

Using an invoice tracking app in your accounting software can save you hours of work tracking payments manually each week.

The software allows you to create an email template in the same language you normally use and then set a schedule for when you want the invoice to be processed (depending on the terms you agree to).

When the recipient receives the email, it looks like it’s coming from your email account – but it’s actually coming from the software. This helps keep everything looking professional.

Some apps, like Chaser, even integrate with your debt collection service (if you have one), meaning they’ll automatically escalate very late payments.

This way you never have to manually track a payment again.

This is a radical idea for many smaller companies, but it is used regularly by larger companies – and not just in difficult times.

With invoice factoring, you sell your unpaid invoices to another company so that they take over the debt. In return, they will pay you around 70% to 90% of the total invoice amount.

Once the customer has paid the entire amount to the factoring company, the factoring company will pay the amount to you. They charge you a service fee, which is usually around 1% to 5% of the total bill.

It should be noted that invoice factoring does not involve hiring a debt collection agency. It is simply a method of facilitating cash flow.

Final thoughts on paying on time

Since some people tend to make late payments, there are understandably a number of ways that companies have created ways to get paid on time – or even early.

Whatever you use depends on your relationship with your customer and how approachable they are.

The most important trick, however, is to work closely with your customer and mention the methods you use to collect payments as early as possible in your conversations with them.

You definitely shouldn’t overcharge them with the first bill. Instead, make it part of your terms and conditions.

People are more able to accept things in the early stages of a relationship, and you should use that to your advantage.

Editor’s Note: This article was first published in November 2020 and has been updated for relevance.

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