Rarely, if ever, have finances been more top of mind for small-business owners than they are today. For small businesses, a steady and reliable cash flow is vital to supporting operations, fuelling growth and overcoming challenges. However, financial threats and barriers loom, one of the most significant of which is late or non-payment. At the best of times it’s a major inconvenience, and at the worst of times it can force small businesses-to go under.
Unfortunately, the threat is rarely far away. It can’t be eliminated entirely, but by implementing simple strategies that streamline payment processes, establish clear boundaries and encourage prompt settlements from customers, it can be minimised significantly. Here are five simple tips to help you receive payments efficiently and on schedule.
Clear and comprehensive invoicing
The key to timely payments for small businesses is clear, detailed and structured invoicing. A clear and comprehensive invoice should leave no room for doubt or query, which slows down payment. Include, for example, an invoice number, due date, payment instructions, and a breakdown of products or services provided. Digital rather than physical invoices are quicker for you and your customers, easier to track and manage, incentivise speedier payment and makes the final – and most important – stage as seamless as possible.
Transparent payment terms
Before commencing any project or work for a customer, ensure you clearly convey your payment terms to them. This transparent approach instils trust and sets the precedence for customers to honour their financial commitments. Key elements to outline include due dates, accepted payment methods, and any penalties for overdue payments. Obtaining written agreements – whether through contracts, email correspondence, or directly stated on invoices – helps prevent misunderstandings or potential disputes.
Late payment reminders
As the holiday season approaches, customers often become harder to contact. Its crucial to proactively address late payments as soon as they’re overdue. Polite yet firm payment reminders are effective for customers, the vast majority of whom will have simply forgotten to pay, rather than consciously decided not to. A payment reminder, whether sent via email, SMS or even through your invoicing software, can go a long way and prompt their payments.
Incentivise early payment
Offering incentives to customers for early payments can serve as a powerful motivator for them, and a great way to keep your cashflow streaming in. Discounts or small rewards for prompt payments might be all it takes to encourage them to settle up immediately. It doesn’t have to be a bank-breaker for you; just a simple gesture like, for example, five per cent off their next invoice. What’s more, the incentive fosters goodwill with your customers, which is a great way to drive customer retention.
Convenient payment options
The more convenient your payment options, the easier it is for your customers to settle up promptly. Cash is no longer king, and consumers want diverse payment options from credit card payments and electronic fund transfers (EFT), to PayPal or mobile payment applications. If your business accommodates your customers’ preferences by offering convenient and flexible payment methods, the more likely they are to continue interacting with your business.
