You have probably heard the phrase ‘Cash is King’. In business, this is true. Despite this, cash flow is an area of business where many struggle to manage effectively causing business-owners to spend many hours chasing – all unbillable time.
Here are some tips to help you to reduce your debtor’s days.
BE CLEAR AND CONCISE
When creating an invoice, think about its layout and messaging. Is the due date easy to see on the invoice? Does the invoice state exactly how much payment is required and have you clearly outlined the various payment options that you accept?
CHARGE FEES FOR LATE PAYMENT
Incentivise customers to pay you on time by charging a fee for late payments. Caution should be exercised based on your client relations and some people may not take well to this. Ensure, communication channels between you and your client are clear and sometimes a quick telephone call may be better than numerous chaser emails. If you are to charge late payment fees then ensure you communicate the terms and conditions around late fees clearly and send a warning before doing so giving them the opportunity to respond. This will ensure clients are not surprised if they are charged for late payment.
There are a vast array of systems available to help businesses to track invoices, monitor payments and manage clients who have missed payment deadlines. Consider using cloud accounting software for your invoicing needs. Software such as Xero and FreeAgent are good for setting up recurring invoicing profiles and automatic reminders.
Also using an intermediary payment collection service such as GoCardless you can set up a direct debit with your customers to ensure you automatically collect all invoices. This will save a large amount of unbillable hours on chasing for payments.
We’ve found the above strategies to help many of our clients in reducing their debtor days and ensuring cash gets into the business fast!