With the average British small business owed £24,841 in late payments on any given day, it’s essential that companies do all they can to improve procedures and get paid on time.
The statistics analysed from Xero’s UK small business subscriber base found that over three quarters (78%) of small businesses are owed money from overdue invoices at any one time.
Whilst there are many potential solutions to the problem, one of the most overlooked tactics is to create a more efficient invoice and invoicing process.
Here, we consider 14 ways to improve your business’s invoicing to help you get paid faster.
Could you make any improvements?
1. Create a clear invoice template
An efficient invoice template can improve payment times considerably. When creating yours the key is to make the design as easy for your customers to read as possible, so simplicity is key. Are all the elements clear? Does it tell your customer how and when they should pay? And have you clearly explained the products and services they are paying for? All of these elements will help to improve your chances of being paid on time.
2. Know who to send it to
When invoicing your customers, it’s vital that you know who the most relevant contact is and always ensure that the contact information you hold for them is correct. Sending the invoice directly to the person in charge of paying you speeds up the process. If you don’t know who the correct contact is, ask. You can do this when placing the order or via account opening forms at the beginning of the sales process.
3. Quote reference numbers
You should include all relevant reference numbers on each invoice. This can include the invoice number, account number and purchase order number. These reference numbers help both you and your customers when processing the invoice. You should also quote these reference numbers on any future correspondence which relates to the same invoice.
4. Clearly state payment terms
It’s amazing how often invoices fail to display the credit terms prominently. If your credit terms are not clearly displayed your customer may put it to the bottom of their payment pile as it may not appear to be as urgent as their other invoices. Also, don’t forget to provide a specific payment date. This ensures that there is no confusion and will increase your chances of being paid on time.
5. Give details of acceptable payment methods
You want to make it as easy as possible for your customer to pay, so always clearly explain all acceptable payment methods. Consider which methods you accept carefully, but it’s wise to give your customers a choice. Remember to include any details they might need, whether they reside here in the UK or overseas. When invoicing a client outside the UK you need to give them your IBAN and BIC code so that they can make a payment to you from abroad without delay.
6. Provide contact details
Your accounts team’s contact details should also be clearly displayed so that, if a customer has a dispute, they can raise it to the most suitable person without delay. This will help you to resolve it sooner and can significantly improve payment times.
7. Refer to your late payment procedure
With late payment a common occurrence it’s important to refer to the procedure you follow in the event that an invoice exceeds terms. This could be charging statutory interest, taking legal action or referring the debt to a collections agency after a certain delay. You don’t need to explain your process in full detail, but you could point the customer towards your terms and conditions. Sometimes simply showing that you take a strong stance against late payment can be enough to encourage customers to pay on time.
8. Proofread for any mistakes
Mistakes on an invoice can lead to disputes and delays in payment, so always proofread before sending. As well as the details of the product or service provided and any mathematical mistakes, you should also check for grammar and spelling and ensure that all of the contact details are correct.
9. Send it promptly to avoid delays
Any delays you make when sending your invoice can give your customer an excuse to stall payment. This makes it vital that you send your invoices as soon as your goods or services have been provided. Automating this process can improve efficiency and help you to save money and get paid faster.
10. Save a copy for your records
You may need to refer back to your invoice, so always keep a copy stored in a safe place and have a back-up just in case. This is not only good for your own reference, it’s essential if there is a dispute or you need to outsource its collection to an agency or even take the legal route to recover payment.
11. Check it has been received with a quick courtesy call
Don’t just send the invoice and expect it to be paid accordingly. Always follow up with a courtesy call to check that the invoice has been received and confirm the customer’s intentions to pay. It’s a good chance to reiterate the payment deadline too.
12. Chase it up when the invoice exceeds terms
Always know when each invoice should be paid so that you can chase overdue invoices as soon as possible. Just a quick call to remind the customer of their obligation to pay you can be enough to secure payment, as any delay could just be a simple mistake. If you are able to take payment over the phone you could even obtain payment there and then.
13. Stick to your late payment procedure
If chasing up an unpaid invoice did not result in payment it’s important that you stick to your late procedure. This shows that you take late payment seriously and often encourages customers to make payment. Don’t leave it too long before applying these processes, as the longer an invoice remains unpaid the more unlikely it is to be collected in full.
14. Say thank you
Never underestimate the power of saying thank you. It’s the polite thing to do but it also shows that you’re grateful for their custom. This can improve customer loyalty and lead to subsequent sales.