Get Paid Faster
If you get paid faster, you can improve your cash flow and provide the working capital you need. How does your business encourage early payment? What do your invoices say about Payment Terms and Conditions? How do you get customers to pay their obligations - sooner rather than later?Take a good, long look at your Accounts Receiveable aging report in order to gauge your current success in this area. As long as your money is tied up in the collection process, you cannot grow it, invest it, or pay it out. It lacks cash liquidity. Here are a few basic ideas to help you get paid faster:Clear Terms and ConditionsOne way to improve your cash liquidity position is to communicate clear terms and conditions in your deal making, contracts and delivery. Back it up regularly in your invoices.Simple terms might show: "Payment Due on Receipt" or "Net 15" (or 10 or 30) if you expect payment within 15 days. This asserts your payment expectation and helps a customer schedule payment.Encourage early paymentTerms can reward customers by encouraging early payment. The customer has cash flow concerns, too, and may have cash lying in low interest paid checking. If your discount beats that rate, you'll get paid first.
For example, your terms might show: "2% 10, Net 30"; that is, while payment is expected within 30 days, you will give a 2% discount if it is paid within 10 days. (You can modify these numbers to suit your needs and/or your client's billing cycle.)
Terms can also punish late payment. Your cash flow - and your customer relationship - suffers when customers don't pay on time. So, it is common business practice to include some penalty for late payment. Ideally, this penalty should correspond to your real loss because of the delay. In any case, you want to be clear and consistent in order to maintain and continue the relationship.Put Terms and Conditions on the invoice form in bold large type. If and when you decide to "liberalize" the terms, send a cover letter or flyer with the invoice to capitalize on your "generosity." Don't miss the opportunity to use the invoice to market your willingness to work with clients. by Steven Schlagel