Getting paid on time is a big problem for small businesses. In a recent survey of 400 businesses, 27% noted that they have a hard time creating and sending invoices.
Another 46% said they have difficulty getting paid on time. While 49% said they have a hard time following up on late payments.
And in 2020 late payments led to a 32% increase in the number of businesses that couldn’t pay suppliers or themselves. So not collecting your invoices on time or in full leads to serious cash flow issues.
Yet, most business owners don't have a concrete strategy for getting their invoices paid on time. Instead, they send invoices and hope they get paid or wait for the surprise of an unpaid invoice.
But there are ways you can avoid late payments and cash flow problems. We’ve compiled a list of the 8 most common mistakes small business owners make when collecting customer invoices.
And we’ve got suggestions for how to fix them. Read on for more.
There's nothing worse than sending an invoice, requesting payment, and getting ignored. As a small business owner, this keeps you from paying employees, suppliers, and even yourself.
But timing is one of the biggest reasons why business owners don’t get paid on time.
When you send your customers an invoice depends on your business and the nature of your goods or services. But many businesses use net 30 invoicing. This means that payment is due within 30 days of the invoice date.
Regardless, the best way to collect more on-time payments is to send invoices immediately after the job, service or goods have been rendered.
This is also where having a standardized invoice and payment collection process can help. And the first step in that process should be to eliminate surprises and communicate payment terms to customers.
Oftentimes business owners don't inform their customers how the invoicing process works. Instead, the customer is often left in the dark and oftentimes is asking questions like "how do I pay", "When is the payment due", "Can I pay online".
The best way to alleviate this is to communicate your payment terms and confirm your invoice timeline.
Payment terms should answer questions up-front and help you keep things transparent. Your terms should also be accessible (digitally or otherwise) and spell out exactly when and how your customers will pay.
Payment terms should explain:
All of the above can be explained at the job site or during intro meetings.
But if you can't do this in person, consider texting reminders.
Why text messages?
Text messages show up almost instantly on a smartphone, unlike an email which often gets overlooked.
Business text messaging software like MessageDesk can help. MessageDesk makes it easy to send customers recurring invoice reminders, reply to customer service inquiries, and even encourage customers to leave reviews about your business.
Invoices include standardized payment information. When you create an invoice, you should always include the following information:
There are also a host of free invoice template generators available, including:
You’ve established your payment terms and sent your invoice. Now what? This is where you’ll want to have a follow-up strategy.
Consider following up via text, email, or voice. Each tool should work together as part of your unified conversational messaging strategy throughout the customers’ lifecycle. This means you stay in touch before, during, and after service is completed.
A sample net 30 invoice follow-up campaign might look like this:
One of the best ways to keep in touch with customers and send reminders is with business text messaging. Platforms like MessageDesk make it simple to text customers for invoice reminders, thank you's, and follow-ups.
Email is the most widely adopted form of digital communication in the world. Everyone has an email address.
But the truth is that many emails often go unread or even get deleted without ever being opened.
So it’s no wonder then that email suffers from lower engagement rates. We’re talking about 20% open rates and only 6% average response rates. And that’s on a good day.
Does this mean you shouldn’t send invoices in an email? Of course not. It just means that you’ll want to consider multiple messaging channels for sending and reminding customers about their open invoices.
This is where tools like business text messaging come in handy.
Suggested Article: Email vs Text? Texting vs Calling? Which One’s Best?
Speaking of QuickBooks Online and Xero, both are excellent small business accounting platforms.
QuickBooks Online and Xero are web-based small business accounting tools. Both make it easy to create custom invoice templates, add custom fields to invoices, collect payments, manage finances and stay in compliance with tax laws.
But despite all their features, many small businesses just don’t utilize the platforms to their full potential. And some of the best ways to leverage your accounting software is through automation and integrations with your other business tools.
Suggested Article: Guide to QuickBooks Online Invoicing
The next best way to get customers to pay on time is by using automated invoice reminders and past due notices.
Automated messages should go out at specific times in the billing cycle. For example :
Invoice Reminder: 7 Days - ENTER THEIR NAME We just received your invoice...Please review below and make any corrections before we finalize it
Already using an accounting system like QuickBooks Online, Freshbooks, or Xero? Then it's easy to set up automated invoice reminders in MessageDesk. MessageDesk can automatically send invoice reminders over text messages anytime invoices are created in your accounting software.
Once you have an accounting platform set up, you'll want to make the most of it.
The best way to do this is through integration with the business tools you use for daily operations.
MessageDesk gives you a simple way to automate invoice collections via text message. so that they can send an automated reminder text asking their customers to pay them faster.
MessageDesk allows small businesses to send automated text messages to customers who haven't paid their bills yet. It's easy to use, affordable, and most importantly, it works.
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