October 24, 2016 en_SG https://quickbooks.intuit.com/cas/dam/IMAGE/A6wvz7RfA/e825fc0d38315ba7612506a94dee91111.jpg https://quickbooks.intuit.com/sg/r/starting-up/3-ways-deal-late-invoice-payments 3 Ways to Deal with Late Invoice Payments

3 Ways to Deal with Late Invoice Payments

John Pathrose October 24, 2016

As a small business owner, dealing with slow-paying customers is not only awkward and annoying, but it can also cause a serious cash flow problem if too many customers miss their deadlines.

Here are four tips and tricks to encourage faster payment from your more sluggish clients. I’ll also explain how invoice factoring, also known as invoice financing, can solve cash flow problems in a time of crisis.

1. Send Invoices Right Away Online

Customers pay significantly faster when you invoice them right after the work is done, and you make it easier for them to pay you. This is common sense. If you ever had to pay for something via check, you probably waited a few days until it was convenient for you to go to the post office. It may have also taken you a few days just to pull out your check book and find a stamp.

By contrast, paying online with a credit card is much less of a hassle. It takes seconds as opposed to minutes. The question is, how do you charge customers online if you’re not an online store using an e-commerce system?

The answer is simple: Online invoicing and accounting software enables you to easily create invoices for your clients, which you can then send through email with a link for them to pay via credit. All customers have to do is click “pay now,” and they’ll be taken to a secure payment processing gateway to enter their card information. These tools are available through most invoicing and accounting programs, including QuickBooks.

2. Agree on a Due Date Beforehand

Things are always easier in hindsight. This tip won’t work for your current non-paying customers, of course, but it’s a good habit to get into for your future jobs. Set the payment due date beforehand, and then you don’t feel as awkward reminding clients when they’re past due.

The key is choosing the right amount of time. If the invoice is due too soon (e.g. “due upon receipt”), clients may not take it seriously. If it’s too far out (e.g. “Net 60”, or due in 60 days), then clients can easily forget it. Many businesses find that 10 or 15 days is a good compromise. You may need to play around with it a bit, however, before finding the “sweet spot” that works for your business.

The formal way to write a due date on an invoice is to say “Net” before the number of days to explain that you want the full amount, known as the “net” amount, to be paid. To encourage earlier payments, you can offer a small discount. “2% 15, Net 30” would mean the client can receive a 2% discount if they pay within 15 days, or otherwise pay the full amount within 30 days.

3. Keep Their Credit Card on File

If you have a lot of returning customers, you may want to enter an agreement in which you keep their credit cards on file and charge them for payments yourself. In order to do this you need their written permission to do so, and you need to make sure you store their information safely and in compliance with PCI standards.

Most merchant processing services enable you to store credit card information securely, on top of also processing payments. However, if you provide a service which your customers pay for on a recurring monthly or annual basis, you may want to use a subscription billing software.

The Bottom Line

Try sending invoices online with links to pay via credit. Make sure these invoices also have a clear due date that isn’t too far in the future, nor too soon after issuing the invoice. If you still aren’t seeing any results, consider holding your client’s credit card on file—with their permission—so you can charge them yourself.

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