7 tips to improve cash flow and get paid faster.
Nearly every B2B business owner knows the feeling of waiting on unpaid invoices, sending follow up email after follow up email.
In fact, a 2022 cash flow report by Xero found that a whopping 48% of invoices issued by Australian SME’s in 2021 were not paid on time, with 10% being paid a month after the due date with the average late invoice being 6.4 days overdue.
Missed deadlines on invoices have more detrimental effects on your business than just angst and inconvenience.The flow on effect leads to inefficiencies across your business, from accounting, to human resources allocation and more.
Many business owners can find themselves without the cashflow to take on new opportunities as quickly as they would like. Additionally, the time spent chasing unpaid invoices when you should be doing more important things, is extremely unproductive.
Which is why B2Bpay has put together this guide to helping you get paid faster, so you can focus on the growth of your business.
1. Send Invoices Straight Away
The quickest, simplest recommendation for getting paid faster is making sure that you are sending clients invoices as soon as possible. You cannot get paid if they have not received the invoice.
There is nothing wrong with sending an invoice well before a due date, especially if you have agreed to longer payment terms. Make sure to incorporate our additional recommendation of automating the follow up system.
The practice of promptly delivering invoices also sets a clearer expectation around payment. If you are waiting and delaying even sending the invoice, then it is hard to expect urgency from your customers end when it comes to payment..
2. Create Recurring Invoices Where Possible
This tip follows on from the first, especially if you have recurring business model. With any type of accounting software you can now easily create recurring invoices that send out automatically.
Even better is to attach direct debit or a subscription payment option that automatically takes payment each month. However, not all businesses are likely to agree to this form of payment.
Any opportunity to automate the sending and follow up of invoices should be pounced upon, that way you only need to be involved in the process on specific occasions, not every time.
3. Reduce Payment Terms And Set Clear Expectations
Unless the client has specifically negotiated certain payment terms, you should look to reduce these as much as possible. A shortened time frame with which to pay creates greater urgency and keeps your invoice front of mind.
It is important to set clear expectations around payment from the beginning, being open and honest about what the terms are, why they are that length and when they should expect to receive an invoice from you.
By getting client buy-in and explaining the importance of paying on time, before the project/service is underway, you can easily set the tone for the business relationship going forward.
4. Offer A Wide Range of Payment Options
The key to getting paid faster is to reduce all possible friction points and opportunities for delay. By using a provider such as B2Bpay you can confidently enable all clients with the ability to choose their preferred payment method.
For example some providers do not allow American Express, even though many savvy business owners use American Express to stack up points when paying for business expenses.
By removing all barriers to payment you can expect your invoices to be paid much faster than if you only had limited payment options such as bank transfer.
5. Automate Invoice Reminders
Using platforms such as Xero, MYOB and Quickbooks you can easily automate invoice reminders to go out at certain intervals. Whether it be prior to the invoice due date or as a reminder once the invoice period has passed.
One thing to be wary of is that for most accounting software, payments made by bank transfer will need to be reconciled manually otherwise reminders will still go out. This is something you can do yourself in a matter of seconds or alert your bookkeeper to.
Not only do automated reminders speed up the payment cycle, they free up your time to focus on other areas of the business rather than having to keep tabs on follow ups.
6. Request Prepayments or Instalments
Especially with long-term projects or large project values it can be much more effective to request a deposit or instalments based on various milestones.
This will increase your cash-flow as well as improve the speed with which you are paid. For many industries this is already best practice but it is worth considering whether you can implement it within your own business.
It may be 50% upfront or a series of instalments triggered by the completion of certain tasks or services, it is important to be creative with your invoicing structure to best serve the needs of your own business.
7. Simplify Invoice / Payment Structure
Following on from our other advice, your focus should be on making the payment process as easy as possible for your client. Review your invoicing templates and make sure the information is simple to interpret and action.
Do you have payment links embedded into you invoice? Is everything in one place for the client? Or does the accounts team need to converse with the client to properly understand your invoice?
These are all valid questions you should be asking yourself and if you aren’t sure, reach out to the team at B2Bpay to better understand how you can rectify.
Using B2Bpay for fast invoicing
With B2Bpay you can make the most of a consolidated platform that accepts all payment methods and provides your customers with a simplied invoice.
Not only can you avoid the detrimental effects of being paid late, but you can enjoy a wealth of other benefits. From earning points when invoices are paid to best-in-class security and support.
By incporpoating B2Bpay and the above recommendations we are confident you can avoid the worrying trend of late payments for Australian SME’s. Get in contact with one of the B2Bpay team today to learn more about how we can help.
