For too many businesses, collecting payments from customers absorbs more time than it should. And of those businesses, too many contribute to the problem by only starting the collection process when the payment is already overdue.
Collecting money is never easy, but lack of control of cash flow can damage or even destroy your business, so getting it right is vital. You can give yourself a significant advantage by starting the process when you first engage with the client. The following steps should help.
Start your relationship with getting paid in mind
Make sure you and your client have a written agreement of the service / products you are to supply them, and the terms and conditions. If one of your terms is to be paid in 7 days, include this in your proposal. Get your customer to sign their acceptance – it doesn’t guarantee you’ll get paid on time, but it does give you a good starting point.
Don’t provide a reason not to get paid
If you make it hard for clients to pay you, those inclined to pay late will grab the opportunity! So ensure your invoice:
- is free of errors – you have invoiced the correct goods or services at the correct price,
- includes payment details – EFT or credit card details, and
- includes a due date.
MYOB Essentials offers an easy-to-use tool that customises your invoices to include payment terms, payment details and so on. Take the time to set these up before you start invoicing.
Invoice on time
If you finish a job in the middle of the month, invoice it. Do not wait till the end of the month. And set the payment date relative to the invoice date, not from the end of the month.
Sending your invoice by email should ensure your client gets it immediately. MYOB Essentials includes default email text, which you can customise for your business.
Invoice On the Go
If you deliver service onsite with clients, consider raising your invoices onsite, and even better collecting payment at the same time. With accounting solutions such as MYOB Essentials on your Smart Phone, you can invoice directly while onsite, and with MYOB Pay Direct you can collect payment at the same time.
Include a “problem notification deadline”
Include a statement like “please notify any issues with goods or services within 7 days” in the email text. What you want to avoid is chasing up the invoice at a later date only to be told that the client has issues with the service delivery. Such tactics are often employed by those who wish to delay payment.
Follow up persistently
It is always hard chasing debt, especially if you run a small business: you have to call clients to chase payment, while trying to maintain an ongoing relationship with them. Sometimes it helps to outsource chasing debt, sometimes it helps to use a software solution. Whatever you do, do it diligently, and do it consistently.
Be prepared to escalate, but do so in a consistent manner
Employ a step-by-step approach – invoice on time, send reminders on time, escalate the “tone” of the reminders; use email initially (it is more cost effective), progress to phone calls for the more recalcitrant. If a client is not paying you, be prepared to explore why not – is it service related, are they experiencing cash flow issues themselves, etc. Only as a last resort should you pursue legal action as it effectively burns your relationship with the client. Finally, do not say, “If you don’t pay this today I will sue you”, unless you mean it, because if you don’t follow through, you have left yourself nowhere to go.
Say thank you for payments
When a payment comes in on time, a “thank you” email builds goodwill ahead of the next invoice, and sometimes a thank you for a late payment helps get the next one in on time. If a client pays me late and has other unpaid invoices, I email thanking them for the payment and reminding them of the remaining invoices, also of the options we offer to make payment easy – such as direct debit.
Following these steps will not create 100% success in getting paid on time – but it will give you the best possible chance of beating the odds.
Subscribing or upgrading your MYOB software will ensure your business is always compliant with tax changes, including the government’s new SuperStream system for paying super contributions. If you don’t have MYOB online accounting software, compare the range, there’s an online accounting solution for every stage of your business.
If you’d like to learn how to make your business more successful, visit myob.com.au/businesstips.