Small businesses are crushed when invoices aren’t paid on time.
Still, 64 percent of them are paid late—which means that these businesses aren’t able to immediately reap the fruits of their labor. Instead, their staffs work hard to deliver for customers only to have their companies sit back and wait for checks to come in.
Being paid a day or even a week late is one thing. Waiting months to receive payment is quite another.
According to a recent infographic from Fundbox, 48% of Net 30 invoices sent by small businesses are paid late, as are 45% and 35% of Net 60 and Net 90 invoices, respectively.
Let’s imagine your small business just completed its biggest project to date for a large client. You might think that a well-known company (e.g., a Walmart or a McDonald’s) would put a check in the mail the moment an invoice came in, but you’d be wrong. According to the infographic, larger companies are just as guilty as delaying payment as their smaller counterparts.
When a business has to wait more than 60 or even 90 days to receive a payment for its labor, operations can grind to a halt. It can be difficult to make payroll, pay utility bills and cover other operating expenses. Beyond that, it can be downright impossible to pursue new opportunities, target new markets or develop new products or services.
So what can you do to improve your invoicing process to ensure timely payment?
Send Electronic Invoices.
If you aren’t already, you should consider sending electronic invoices to your customers. You will see a much quicker response when you give customers the opportunity to pay electronically.
Send Detailed Invoices.
Be sure to ask all your customers what they require on invoices. The more information they have on the invoice about the project, the less questions they’ll have.
Interest Fee and Incentives.
Try giving a small discount to customers who pay within a specified period of time—for example, 2% for payment within 10 days. This can significantly shorten your payment cycle. Also establish a late payment fee or interest for invoices that are not paid on time.
Provide Payment Options.
Give your customers the option to pay however they prefer. It can definitely speed up the payments process. Let them pay by check, electronic funds transfer, credit card or debit card etc.
Use Your Invoices.
While you can make significant improvements to your invoicing process, oftentimes there are still situations when you need cash on hand to run your business or jump at an opportunity to grow. The good news is that instead of harassing your clients by asking for checks, you can use a service like Fundbox to advance payments on your outstanding invoices. For a small fee, Fundbox quickly and easily provides access to the cash small businesses need to grow. Companies then have 12 weeks to repay the advance, plus the small fee.
Please include attribution to fundbox.com with this graphic.