For a business that depends on invoice payments rather than cash purchases, late customer payment can be anything from an annoyance to a disaster. According to some estimates, as many as 60 percent of invoice payments are late. When you have regular expenses such as payroll to meet, this can cause serious problems for your cash flow situation. The following are some tips to protect yourself from late invoice payments and enjoy better cash flow.
4 Tips to Get Paid on Time by Customers
Send Out Invoices Promptly
If you want your clients to pay on time, make sure you have an automated process for sending out your invoices. There are many automated software programs such as Quickbooks and Freshbooks that make it easy to automate invoicing. You should issue an invoice as soon as you’ve sent your client a product or service.
Set Firm Deadlines
Without a definite deadline, you’re unwittingly sending clients the message that they can pay whenever it’s convenient for them. It’s important to create firm deadlines with every invoice. Since many clients tend to pay late, it’s helpful to set shorter payment terms. For example, if you want your payment within 30 days, ask for payment within 15 days. Make it clear that you’ll charge clients a penalty if they pay late.
Give Clients an Incentive to Pay Promptly
To encourage clients to pay their invoices promptly, take the old carrot and stick approach. The stick, of course, is the prospect of incurring penalties if they pay late. It’s equally effective to offer “carrots,” such as lower prices for paying on time or even early. You might offer a special discount for pre-payment.
Consider Invoice Factoring
Invoice factoring is a type of financing that frees you from having to worry about late payments. For small and midsize businesses that are seeking to improve their cash flow, factoring is a viable alternative that makes it possible to collect payment immediately rather than waiting for customer payment.
Key Benefits of Invoice Factoring:
- Receive instant payments. When your invoices are factored, you can get paid in as little as 24 hours.
- Have more cash on hand. Waiting for payments can leave your business cash poor. With better cash flow, you can invest in building your business and meeting your financial obligations with ease.
- Improve your financial situation without debt. Unlike loans, invoice factoring doesn’t involve incurring any new debt. You can factor invoices without affecting your credit.
- You don’t need perfect credit or a long history. Newer businesses and those without credit often have a hard time getting loans. Factoring companies, however, look at your customers’ credit rather than yours.
The health of your business depends on consistent cash flow. Late-paying customers can be a serious hindrance to your growth and even survival. If you’re considering invoice factoring, Riviera Finance has been helping businesses of all types and sizes with financing solutions since 1969.
To learn more about how invoice factoring can help with slow-paying customers, contact Riviera Finance today.