Fran Molloy
Around a third of all business invoices are paid late, disrupting cash flow and limiting a business's ability to pay its bills and wages, and to order inventory. That's a pretty scary statistic for cash-sensitive organisations. So, what can you do to make sure your business isn't consistently receiving late payments? Start by thinking about the way you ask for payment - your invoices! Here are five tips to improve your invoices and speed up payments.
1. Complete all necessary admin
Invoices can sometimes be delayed because administrative requirements haven't been met. This is often the case if you haven't been set up on your customer's account systems yet, or you need to provide your bank details or your ABN. You may also need to supply other documentation - for example, proof of your indemnity insurance.
2. Get organised
If your invoices don't look professional, your customers might not take them seriously. Make sure you format your invoice according to the guidelines offered by the Australian Taxation Office (ATO). Clearly identify your payment methods, ensuring you include your bank account details, PayID information whether you use Osko real-time payments and any other payments you accept, for example PayPal.
It also helps to send your invoices as soon as possible - for example, on the day an order has been placed, as soon as you've delivered a service or product, or on the first Friday of the month. Most importantly, establish a system and stick to it.
3. Include your terms
Make sure you set out your payment terms clearly in writing, and the same information is included on your invoices. Some organisations even publish their terms on the website, to reduce the chances of a misunderstanding. You'll find it easier to collect from your customers when your expectations have been clearly expressed.
4. Use invoice reminders
Many accounting systems - for example, Xero and QuickBooks - allow you to set up automatic reminder emails for unpaid invoices. If you use a simple invoicing system that doesn't come with this functionality, or you send invoices manually, then a program like FollowUpThen can help remind you.
One approach would be to send a polite invoice prompt two days before the invoice is due, and an overdue reminder if it's not paid within the two days following the due date.
5. Revisit your payment terms
Consider extending your customers' payment terms in return for reliable and on-time payments.
This means you and your customer will need to agree on what constitutes an 'on-time' payment.
This approach is often better than dealing with an unreliable response to short payment terms, which can tie up resources chasing late payments and can impact your ongoing relationship. Before you stop dealing with customers who habitually pay late, think about revising their payment terms - and consider increasing your price to cover the new terms.
Following some of all of these steps should help to boost your on-time payments. Alternatively, prioritise working with businesses that are signed up to the Australian Supplier Payment Code - a voluntary initiative established by the Business Council of Australia. The Code commits signatories to pay eligible Australian small business suppliers on-time and within 30 days of receiving a correct invoice.
Tired of waiting days for invoice payments to transfer? Take advantage of real-time bank transfers thanks to the New Payments Platform's (NPP) first payment service, Osko
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