How to get paid faster
Running a startup or small business usually means there will be many instances where cash is tight. It’s important to always put the focus on your main source of cash inflow – revenue. This means being efficient and consistent on invoicing, following up on outstanding amounts, and of course, accepting payment.
Here are a few tips on how to get paid faster, which will ultimately help create consistency in your cash flow; not to mention will make you, as a business owner, much less worried about cash.
Cloud-based accounting system
Setting up a proper cloud-based accounting system, such as Xero, will mean properly formatted invoices that will send via email to the customers. If you think you need to print out and email every invoice, think again! These days the invoice can simply be created in your accounting system before being emailed out to your customer with an attachment.
Not only will you have great looking invoices sent out automatically, but you can also keep track of what invoices are outstanding. An accounting system will show you your total AR (accounts receivable) outstanding, so you know exactly who needs a nudge.
You can also set up auto-reminders (for example, after 7 or 14 days overdue). Once these are enabled, you don’t have to think about following up on emails each week. Any responses to email reminders will come back to your main company email.
Invoices are great but getting paid is even better! Having a proper payment system in place can create convenience for the customer, creating quicker deposits on your end. We recommend using a system such as Stripe for credit cards or Plooto for ACH (direct deposit) payments. Both can be set up with recurring payments if you have monthly subscriptions or fixed retainers.
Although it can be hard to cut out cheques, it’s highly recommended to not accept cheque payments in your business (if you can easily avoid it). You can simply add your preferred payment methods to the invoice so it’s clear for the customer to pay via credit card, e-transfer, or ACH.
Update payment terms
If you are finding it difficult for customers to pay net 30 or net 45, try updating your payment terms to net 15. This will create more urgency for them to pay earlier; two weeks is a lot closer than four or six weeks.
In addition, you could add an interest payment term to your contracts and invoices if amounts are not paid on time. For example, “an interest charge of 1.5% will be added to your total if the outstanding balance is not paid by the due date”. This doesn’t work for every business, but something to keep in mind if your customer base is less motivated to pay.
If you want to avoid charging interest, you could also offer a discount for early payment. For example, “2/10 net 30” would mean that if the amount is paid within 10 days, then a 2% discount would be applied (otherwise, payment is due net 30).
Hire a bookkeeper or controller
The above tips can be extremely useful to bring down the administrative work required on your end. However, you will save even more time if you hire a bookkeeper or controller to take over the finance function in your business. This means your invoices will always be sent out on time and you won’t have to worry about outstanding amounts or payments not being reconciled correctly. This will also provide financial oversight in your business so that someone is constantly watching over the day to day tasks.
Hiring a bookkeeper or controller means leaving the tedious financial tasks to them, leaving you to focus on what you do best to grow your business.