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It is very frustrating when one completes a project or item delivery in a timely manner and then must spend twice as much effort in collecting the payment they are due. For small business owners and entrepreneurs, this can be especially trying because they are often responsible for all aspects of the business. They not only have to find new clients; they also must complete all the work and then act as their own accounts receivable department. The following three tips will make the entire process easier.

Impeccable Invoices

The first step in creating an effective accounts receivable process is in providing clients with easy to understand invoices. Payments are often not made simply because the client’s accounts payable department doesn’t know exactly what they are paying for or they aren’t sure where payments should be sent.

An invoice template like this one here, is one way to ensure all of the pertinent information is easy to find and that it is always included. Details such as the business phone number, mailing address, and email all give the client to find the answers to any questions they may have. Payment method should also be clearly outlined, whether that is a check by mail or a payment via PayPal.

It is also important to be as detailed as possible in the invoicing process. Be sure to list exactly what each charge was for if items or services were being sold. For invoices detailing total hours worked it is best to show the total number of hours worked each day as well as the tasks completed if applicable. Clients want to know exactly what they are paying for in order to avoid overpaying and also to make expenses easier to itemize at tax time.

Clear Expectations

Before agreeing to work with a new client, it is imperative they are aware of the terms of service. If there are clear policies in place about the amount of time a client has to pay, it can make it much easier to collect payment in a timely manner. This is often easier to do by using an electronic system that will easily make a record of all information.

For example, standard business practices once allowed companies 30 days from the time of invoice to send payment due to the delay caused by sending things through the postal service. When invoices are received electronically there is no reason to expect to wait a month for payment. However, if it has not been clearly explained that payment is expected upon receipt or within a specific time frame many people will push that invoice to the bottom of their pile of expenses.

One way to encourage timely payment is to include a clause that outlines late charges and how they will be applied. When people know there will be a consequence for not paying on time, they are less likely to put off making their payment.

Fast Follow-Up

With a system in place to alert clients of exactly what their charges are for and when payment is expected, it is easy to determine when it would be appropriate to follow-up for payment. Some studies have indicated that the longer invoices go unpaid, the less likely it is they will ever be paid whether partially or in full.

When one is sure that the client is aware of the due date, the best time to follow-up with them is the day after the payment was due. That way they can be reminded about the payment before the previously explained penalty is applied to their account.

A steady flow of cash into a business is essential for maintenance and growth. The work completed was not donated and deserves compensation. When great invoices, clear expectations, and a quick follow-up protocol fail to encourage clients to pay their invoices in a timely manner, it may be necessary to explore punitive measures.

 


 
 
 

 
 

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