Five Ideas to Help Your Business Get Paid Faster

Five Ideas to Help Your Business Get Paid Faster

Accutrac Capital 01-Jan-2013 0 Comments

A 2011 survey of 937 businesses found that 43% of these businesses have customers who are more than 90 days late on paying their invoices. 1 in 4 of these companies admitted that they have trouble collecting payment from their customers.

Here are five ideas that will help ensure that your invoices are paid faster.

#1 – Don't wait until month-end to invoice

While it may be more convenient for you or your bookkeeper to spend a day at the end of each month creating invoices, it's not in the best interests of your cash flow. To optimize your cash flow, invoice within 48 hours of delivering your product or service to your customer. That's especially important if you've offered that customer terms (a grace period of time before they're required to pay your invoice). If for example, you offer a 30-day payment term and you wait 2 weeks until it's month end to invoice them, you've really given them 45 days to pay. Timely and consistent invoicing will ensure that your cash flow stays consistentÉand available when you need it.

#2 – Don't automatically extend credit to every customer

Before you extend credit to a customer, make sure first that they're creditworthy. Perform a credit history check, ask other vendorsÉdo your homework and find out as much as you can about a potential customer's reputation for paying their invoices. If you have a customer who traditionally pays late, reconsider your credit terms and adjustÉeven if it means denying credit until they can prove their creditworthiness to you.

#3 – Reward customers for paying early

A discount for paying early can be enticing to many customers. For example, if your customer always expects a 30 day term, you may want to offer an early payment discount (ex: 1.5%), if paid in 10 days. And, never underestimate the power of saying Òthank youÓ. For those customers who always pay on time, make a point of thanking their accounts payable person each time you receive a check. You'll stand out from every other vendor who typically only communicates when there's a problem.

#4 – Don't train your customers to pay late

When you fail to consistently follow up on late payments, you are sending a silent message that it's okay for your customers to pay you late. Have a solid and consistent plan for issuing, tracking and following up on invoices. While it won't guarantee that all your invoices are paid on time, it can greatly reduce the number that are paid late.

#5 – Consider factoring your accounts receivable invoices

Sometimes, even waiting the 30 days your great customer demands as their payment term is too long when you're facing a cash flow crisis. Provided you do business with creditworthy customers, you can factor your accounts receivable invoices in exchange for immediate cash. Factoring has the added advantage that the factoring company will handle managing your accounts receivable. You can hand off the time-consuming job of chasing after receivables to a reputable factoring company while you enjoy the benefits of immediate cash to boost your cash flow.

For more information about factoring and managing your accounts receivable, visit www.accutraccapital.com.
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