Here are seven ways to recoup your company’s cash faster:
1. Offer a discount for early payment.
To incentivize your customers to pay you earlier, offer them a price discount if they do, and be sure to highlight it in the contract and invoice. Several of our customers take advantage of an early payment discount we offer, and sometimes even overnight a check to make sure they don’t miss our discount window.
2. Use online payment systems.
Several of our customers use online systems to submit invoices. If we participate in those systems, we find many of them will pay off their invoices within 15 to 18 days of receiving them. The best part is that the money is electronically deposited directly into our account. If your customers are not using an online system, consider setting one up for your company. An example is using a service called bill.com, which allows you to pay anyone or be paid by anyone electronically.
3. Require an upfront fee.
If you know that servicing a customer requires you to expend big dollars on its behalf, collect as much of that money as possible (if not all of it) right away. Submit an initial invoice, and insist it is paid on receipt, or outside of normal payment terms. Most companies understand the situation and are willing to accommodate.
4. Delay the work.
This is a hard one to do. But if you find yourself in the middle of a project and your customer delays payment, stop the process, and insist on having payment in-hand before you or your team finishes up the work. Often, this is the most valuable leverage a small business has in its arsenal.
5. Take credit cards.
This will cost you an origination fee, but the percentage might be worth it to help get you your money sooner–whether payment for your services, or coverage of upfront costs. Many accounting packages already have a built-in ability to take credit cards, too.
6. Invoice for lower sums, but more often.
When we invoice customers for large amounts of money, we find the invoices get stuck somewhere in the payment process. The dollar amount seems to have a lot to do with it. If we submit an invoice to a customer for more than $10,000, it can take 15 to 30 days longer to receive payment than a smaller amount of money. An invoice of less than $10,000 is more often than not paid very close to on-time. If you review the size of your customer base and dollar amounts you work with, you may also discover a breaking point between invoices that are paid quickly and those that languish on your customers’ desks.
7. Talk with your customers about accounts payable.
This might seem obvious but it’s often overlooked: Have a conversation with your customers about their accounts payable processes at the start of your relationship. You will find that knowing your customers’ processes will help you when you bid for new business.
If you enjoyed this post, I would be grateful if you helped spread the word by emailing it to a friend or sharing it on LinkedIn, Twitter, or Facebook. Thank you!