As a small business owner, there’s a lot to keep tabs on. It’s not always easy to manage finances on top of everything else, and it’s even more challenging when an invoice—or invoices—go unpaid.
An unpaid invoice can become a major source of stress. And, if you rely on invoices getting settled timeously, the funds can become critical to the continuation of your business.
But asking clients for money owed isn’t easy. In fact, it’s one of the hardest parts of being an entrepreneur. Even though it shouldn’t be!
If you want to avoid those awkward conversations about payment, these five ideas can help:
1. Clearly Stipulate Payment Terms And Conditions
As the person or business sending out the invoices, you get to stipulate the payment terms. However, you need to ensure that these terms are clearly outlined so that clients cannot say that they were not aware of them.
There are many types of payment terms that are standardized and easily understood. These include net days, on delivery, upfront, and month following. Whichever setup you choose for your business, make sure you lay out all of the terms and conditions clearly. These terms should appear on your quotes, your invoices and even on your website.
2. Include A Penalty Clause For Late Payments
Following on from setting the terms and conditions for payments, you can also stipulate that a penalty fee will get added to the invoice if the payment date is missed without prior communication. Just make sure that the clause is clearly labeled and spelled out within your payment terms and conditions.
Late penalties on invoices usually take the form of adding on interest or a percentage of the total bill. You can stipulate anywhere between 2% and 10%, depending on the type of work you do and the amounts you normally invoice for. It’s up to you to decide what will work for your business.
It’s also important to note that you don’t want to include late penalties in a threatening way. This can put you on the wrong foot with new clients who haven’t had a chance to prove that they can and will pay on time. If the penalty clause is just a line item within your regular payment terms, then people will see that this is something you send to every client and likely won’t get offended.
3. Create And Use An Accounts@ Email Address
Every element of your business should look professional, and your invoices are no exception. Plus, you should keep your invoices and accounts separate from your other activities within the business. A great way to do this is by setting up a dedicated email address that’s just for invoicing. Having an [email protected], finance@ or a similar accounting-related address is essential and easy to set up.
With a separate email address for sending out invoices and receiving comments about payment or proof of payment, you’ll find it far easier to track payments. Communications won’t get lost or missed in your main inbox.
Even if your business is just you, having a separate email address just for financial conversations will make your life easier.
Remember to always keep conversations under this address professional and strictly to finances at all times. Some businesses even go so far as to make a fictional accounts person so that conversations outside of invoicing and payments don’t end up on this email account. This creates a buffer too and lets you stand up for yourself via a professional proxy if the need arises.
4. Send Automated Reminders
There are so many programs that allow you to set up and send automated emails or text messages without input from you. It’s simple to get things set up so that your customers automatically get a reminder email or text a week before, the day before, or even the day their payment is due.
If your business sends out lots of invoices every month, it can take a lot of time to go through your list and chase people who haven’t paid. With an automated message that sends on the set date, you don’t have to spend time and effort trawling through your payments. Just set the message to send and include a line that says something like “if payment has already been made, please ignore this message.”
Of course, having these automated messages set up only works really well when you have set payment dates rather than each invoice having its own payment due date. If all of your invoices are due on the 25th of the month, you can schedule your automated messages to go based on that due date.
Another bonus of automating your reminder message is that you don’t have to sit down and type out that email or make that phone call each time, thereby avoiding those awkward payment conversations.
5. Make Your Invoices Memorable
The look and feel of an invoice is often largely ignored, and this is a huge mistake. You want an invoice that makes an impression and that people will remember, making them more inclined to recall that they owe your business a payment. You can also use your invoice as a marketing tool that fosters a connection between you and the client and encourages retention.
If your invoice gives off a professional feel and has all of the necessary information spelled out clearly, you’re far more likely to get a professional response from the recipients.
You can make your invoice memorable by including a clear and obvious layout for all line items and prices. You should also have your logo, brand colors and easily legible fonts on your invoice. If you use a self-employed invoice template, you can set up your invoice format once and simply populate your template with the relevant details before sending it out. This ensures that your invoices all look the same and you don’t accidentally exclude any important details.
Another great way to make your invoices stand out is to include more than one payment option. People like choices, and you’re giving them control over how they interact with your business. Try to include options like credit card payments, bank transfers, PayPal, and newer options like Apple Pay and Google Pay.
Stay Ahead Of The Payment Curve
With an estimated 1 out of every 10 invoices issued not getting paid on time, it’s easy to despair that your business will join the trend. However, when you’re proactive about your invoicing and set proper professional boundaries, you’ll avoid those awkward conversations with customers about late payments and increase the likelihood of getting paid on time, every time.