How to get paid on time
Getting paid on time is essential for keeping your business cash flow healthy. Some of the following ideas and options might help encourage your customers to pay on time or before payment is due.
1. Ask for upfront payments
Try it with your regular customers, ideally those who always pay ahead of time.
Another option is to be able to accept payment online or in person when the goods or services are delivered. Xero also provides guides to accepting payments online.
2. Invoice immediately
Be prompt with invoicing, clear on the payment due date, and explain your payment terms. It's also important to include the implications of paying late too. Consider offering customers different ways to pay.
3. Offer a discount for early payment
Offering your customers a discount can encourage them to pay ahead of the date that payment is actually due under your business conditions or contract. If one of your customers is responsible for a larger than average proportion of your revenue, it may be worth offering special terms to incentivise them to pay ahead of time, for example a 2% discount off the total amount if payment is made before the due date. It's important to do some number crunching with this, though. You want an offer that helps with your cash flow, not one that slows it further.
4. Remind, then chase
Set up a payment reminder in your calendar that you update when you send an invoice. The idea would be to alert you with a reminder before a payment is due. Remember to cancel the alert once a payment has been received.
If the due date has passed, you've got no choice but to chase. Call your customer first. It shows you're serious, but gives your customer the chance to explain why there might be a delay.
5. Tailor to your customers
Understanding how different customers contribute to your revenue is key. You may be able to tailor your payment terms to different customers.
- List all your receivables in order of size and date. You'll soon spot those who continually pay late
- Put late payers on a cash-only basis
- If they continue to be late payers, consider withholding future services or goods
6. Have a credit policy
A credit policy is letting your customers know up front what you expect of them financially. In most circumstances if customers know what is expected of them, they are more likely to abide by the rules you set, for example, full payment due 10 days after receipt of invoice. However, you must also be clear on the consequences of late payment, such as penalty payment or a late payment fee on overdue accounts.
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This page is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and should not be relied on. This information has been prepared without considering your objectives, financial situation or needs. We recommend you seek independent professional advice before acting on this information.
