As a factoring company, we talk to business owners everyday about cash flow. Some complain about slow payments. Others work in unpredictable or seasonable industries and are looking for some help to make it through the harder months.
In either case, the goal is the same: to get paid as quickly as possible. If you’re not currently working with an invoice factoring company, there are some immediate and proactive steps you can take to get paid faster.
Ultimately, you can’t make your client pay you sooner or even on time. You hope they do, or at least honor the contract. But you should also be doing everything you can to simplify the payment process — for your client and yourself.
Let’s look at seven quick ways you can start taking control of your payments.
- Bill Immediately After Service or Delivery
Don’t wait to invoice your customers. The second you’ve delivered goods or completed a service, get the invoice out. Many organizations only send invoices every couple weeks or even monthly, which only increases the amount of time it takes to get paid.
- Use Net 10 Payment Terms
Standard invoicing terms vary by industry, but net 30 (which means your customers have 30 days to pay) is the most common. In some industries, net 60 or net 90 is also common. Set shorter payment terms, like net 5 or 10 days. Setting these terms is easier to do with newer clients. They don’t know a difference. Work with existing clients to move closer to your preferred terms. Remember that early and frequent communication can help avoid issues or confusion later. Give them a call or shoot them an email a couple months before the new changes go into effect
- Send Reminders
Don’t send invoices and then forget about them until you send the next round. Follow up. Many businesses have success sending a reminder a day or two before an unpaid invoice is due. If invoices go unpaid, send another reminder the day after payment was due. Continue to follow up on a bi-weekly basis until you get a response.
Sending all those invoices and reminders probably sounds like a lot of work, and it is if you’re doing it manually. Get invoicing software that will take care of the reminders for you and that will automatically generate invoices for your customers.
- Charge a Late Fee
Make no mistake, if your customers aren’t paying you in a timely manner, it’s hurting your business and costing you money. You’re unable to pay your bills, potentially incurring late fees and other penalties. Late fees can be helpful motivators for slow-paying clients. A late fee sends a message to your customers that they need to prioritize your payment
- Reward Good Payers
Invoicing doesn’t have to be all doom-and-gloom. Positive reinforcement works too. Do you have customers who consistently pay on time? Offer them an incentive to pre-pay. Or, create incentives for anyone, such as a 5% discount for those who pay within 5 to 10 days of receiving an invoice.
- Work with an Invoice Factoring Company
At the end of the day, how you address your invoicing practices determines how and when you get paid, but it can also influence the relationships you have with your customers. If changing up your terms is going to send your customers to competitors, create friction in the relationship, or isn’t producing the results you need, invoice factoring can help. With invoice factoring, you sell your unpaid invoices to a factoring company. Factoring companies advance you a large portion of the balance of the invoice. From there, the factoring company handles the invoicing process and collects from the customers. Once the customer pays up, whether it’s 30, 60 or even 90 days later, the factoring company pays you the remaining balance, minus a nominal fee for the service
If invoice factoring sounds like a better solution for your needs, get an instant estimate from Triumph Business Capital.