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I’m spending too much time following up on unpaid invoices. How can I get my clients to pay me faster?
It’s all too common for business to spend long periods of time trying to collect monies it is owed, which not only takes up a lot of time but can also lead to cash-flow problems.
Here are a few tips to help you collect your outstanding amounts quicker:
Invoice quickly Often, there is an opportunity to speed up the invoicing process internally. Some companies invoice every two weeks: why not do it weekly, or daily? Other times, you may collect information too slow that is needed to issue an invoice, like confirming your supplier pricing or getting approval for a credit that a customer requested. Speed up your internal information flows to make sure that you can invoice your service or product quicker.
Arrange interim payments For projects that require substantial cash outlays on your part, ask for interim invoicing to ease the strain on your finances. You can ask for a portion of the total amount on signing, another part way through, and the final payment when the project is complete. In addition to reducing the strain on your cash resources, it puts more accountability on both of you to keep your project moving ahead on time.
Contact customers before the amount is due A quick connection with your customers’ accounts payable people to confirm that an invoice has been received, that all questions are answered, and that your invoice is in the queue for payment can speed up collection time substantially. It removes the last-minute surprises such as, “We have not received the invoice”, “We have some questions about the pricing”, “we are waiting for a credit”, etc. Get that out of the way early so that there is no acceptable reason for late payment.
Resolve outstanding issues quickly The longer an issue surrounding an invoice is outstanding, the less likely it is that you will collect the full amount. Some people are masters at creating ambiguity surrounding money that they owe. You need to resolve ambiguity immediately to clear the way to receive payment. Don’t be shy about moving up the ladder quickly if it looks like they are stalling you. Speak to supervisors or managers who can approve your payments. Be the “squeaky wheel.”
Stick to your terms Finance people try matching accounts receivable and accounts payable in terms of the number of days outstanding. Some lean a little heavier on stretching the number of days outstanding to vendors. This forces your company to provide them with financing. You are both in business to make money. Don’t let their inefficient collections affect you. If your product or service is worth the price, then insist that they pay on time. If they won’t, they may not be as profitable for you as you think. In the long run, you want customers who appreciate the value you bring to them. When they do, they will pay on time.
Get help You are probably not the only person who can collect accounts in your company. Use existing staff or hire others to do this for you. Only get involved when you need to. Spend your time building the business.
As published in The Globe and Mail