On your list of priorities in your business, I’m sure getting paid is high on the list. Keeping cash flowing in is the life blood of any business. Not getting paid is a huge problem, but so is having to wait and wait for customers to pay you. If you don’t know when you can expect your customers to pay, then making plans for how you will make your own payments becomes impossible.
If you are having issues collecting on amounts owed to your business, one reason could be your Accounts Receivable processes. We have found that making these five changes can help to untangle the kink in your cash flow.
1. Reduce invoice entry time
The first step in your Accounts Receivable system is creating the invoice that lets your customers know that they owe you money. For many, this step is the most time-consuming. If this process is eating up time, then no doubt you are not getting paid as fast as you could. Thankfully there are many ways to speed up this process.
If your business provides the same services to a customer on a regular basis, a common feature in many accounting systems is the automatic creation of recurring or repeating invoices. You set it up once and then can basically forget it because the accounting system will create the invoices for you. You can have them be created as drafts so that you can have the power of approval later or have them approved automatically.
If you use a Customer Relations Management (CRM) or another system that has an invoicing feature, ensure that the information flows seamlessly into your accounting system. This can save you loads of time! Additionally, if you use estimates or project management tools, these also should flow into your accounting system. The key is to ensure that your invoicing data is entered in a single place and communicates to your other systems so that there is no duplicate entry.
2. Deliver invoices electronically
Now that you have your invoices created and they have flowed into your accounting system, it is time to let your customers know what they owe. For some, even in 2020, this can mean printing and mailing invoices. If this is the situation in your business, you are losing days or even weeks. There’s a reason it is called “snail mail”.
In most cases, the sooner your customer sees the invoice, the sooner you will receive payment. If you are not already utilizing email or other electronic invoice delivery methods, we strongly urge you to make this change as soon as possible.
3. Update the wording of your payment terms
You may be surprised to learn how much setting payment terms can affect how quickly you get paid. Some data seems to suggest that the way you word your payment terms matters. According to a study and article published by FreshBooks, just adding a “please” or “thank you” to your payment terms can increase the percentage of invoices that are paid by five percent. The same study also noted that putting your payment in terms of days leaves less room for misunderstanding as opposed to phrases like “net 15” or “upon receipt”.
Another tip is to set your payment terms for a shorter period of time. Your customer may not pay within the short window but you are likely to still get paid faster than if you provided a larger window of time.
4. Send reminders
No doubt, your customers, like yourselves, have a lot going on in their lives. All of us are probably guilty of seeing an invoice and having every intention of paying it immediately but then life happens and we forget. In such cases, receiving a helpful reminder is a kindness. If you send periodic reminders on unpaid invoices, you will likely find that your customers are not intentionally withholding payment. They are simply human. As noted above, it is best to keep the wording friendly. Rather than being irritated, your customers will likely thank you for the reminder.
5. Accept electronic payments
We have noticed that more and more customers are requesting the ability to make payments electronically. Printing and mailing checks is just not efficient for anyone. It really is a lose-lose. Providing your customers with the option to pay you electronically can drastically speed up the time that you receive payment. You also save the time needed to make a trip to the bank to deposit checks. Definitely a win-win.
There is no shortage of solutions to get paid faster. QuickBooks and Xero both offer payment solutions that can be launched directly from invoices created and sent from your accounting file. Plus there are many other solutions that integrate for processing payments. The one that is best for you can depend on a variety of factors. Need assistance? Reach out to Beyond to see how we can help!