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As a small business, one of your main cash flow concerns is getting paid on time.
Spending all of your time reminding clients that they owe you money isn’t the best, or most efficient, use of your time.
Optimizing your invoicing process is one of the quickest, easiest ways to make sure you’re collecting on time. It’s often the small changes that can make big impacts on your cash flow.
👉 Don’t have time to read the post? Check out Nick’s Twinterview on this topic.
At Jobber, we’ve helped our customers process over $1.8 billion in invoices. With these 5 easy tips, you’ll be collecting on your invoices and improving your cash flow in no time!
1. Update your invoice
Having the right information on your invoice is the first step to getting paid.
Think of your invoice (and really anything you send to your clients) as an extension of you and your brand. Our friends over at Due.com analyzed 250,000 invoices and came up with the following findings around what you should put on your invoice:
Have your logo on your invoice
- You are 3 times more likely to be paid if you do.
Specify the payment due date
- Generic statements such as “Payment must be issued within 30 days upon receipt” should be avoided. They don’t convince people of the importance of paying the invoice.
- Instead, include the specific due date for the specific invoice, like “Payment is due on or before June 15, 2016.” You are 8 times more likely to get paid on time if you do.
Include payment period terms
- A professional invoice should be clear, include a polite statement about your payment period as well as what will happen if the customer doesn’t pay on time. By including payment terms on your invoice, you’re 1.5 times more likely to get paid on time.
2. Think about your payment terms
Are your payment terms making it hard for your clients to pay you?
Have a look at what you’re currently saying. Payment terms work best when they are short, clear, easy to understand, and easy to spot. If yours aren’t hitting all of those points, change them up!
Payment Terms Wording
Research on payment terms has found that the wording definitely matters:
Say please and thank you
- Just adding please and thank you in the payment terms has been shown to increase the percentage of invoices paid by 5%. And, as an extra bonus, clients also paid faster.
Don’t use ‘net’ and ‘payable upon receipt’
- The research showed that clients paid more often and faster when they saw the word ‘days’ instead of ‘net.’
- Using ‘payable upon receipt’ wasn’t as effective as specific term lengths like ‘28 days’. Even better, get specific with due dates: ‘Invoice Due: March 31, 2016.”
Discounts and Penalties in Your Payment Terms
Our friends at QuickBooks recommend that you consider a small discount for clients who pay you before their invoice is due, such as 2% off their next bill.
QuickBooks also recommends an interest penalty for those who pay late. Interest penalties seem to lead to two things: you may get paid slower, but a higher percentage of your invoices will get paid.
3. Choose the right payment period
Payment periods vary by industry and even country.
Xero has an interesting recommendation about a payment period length that may be the most effective. Their invoice research showed that clients were an average of two weeks late paying their invoices.
So, if you want to get paid in a month, they recommend changing your payment period to 13 days.
That way even your clients who pay late should still fall within your internal one month time frame.
4. Ensure timely invoicing
A system for timely invoicing combines your processes and invoicing policies with software that will make all this invoicing work easier to do.
For example, say you want to implement a policy that your team should invoice immediately after they complete the work. Invoicing software will make it easier for everyone to follow this new policy.
Every system will have its unique parts depending on your business, team, clients, and software. You need to decide which pieces you want to use and how to put them together.
Bottom line: You need a system. It doesn’t have to be complicated or even that formal. But the results—getting paid fast and boosting your cash flow—are worth the effort.
If you already have a system in place, awesome! Every once in awhile you should take some time to evaluate it to make sure it’s working well.
5. Use Pay Now Buttons
Today, plenty of invoices are designed to be delivered by email—those that usually include buttons or links that clients can click to ‘Pay Now’. If your system lets you include this, and you’re not leveraging it, what are you waiting for!
From the client’s perspective, this button makes it simple to pay. Viewing an online invoice and having the ability to pay with one click will help them pay you faster. You’ll see more immediate payments starting right away if you implement this today.
An action button will incentivize your clients to go through the payment process right away so they don’t leave it for later and forget about it.
Bonus! Use this free invoice template
Based on the insights and research we pulled together for this article, we’ve put together a free invoice template for you, complete with wording you can tweak for your own payment terms.
It’s easy to blame late-paying clients and say they’re the ones with the problem.
But let’s face it—sometimes we’re the ones with the problem. Make sure you’re not the holdup by streamlining your invoicing process.
In this first post, we talked about the importance of:
- Updating your invoice to look professional.
- Creating a strategy for your payment terms.
- Implementing the right payment period for your business.
- Ensuring you have an invoicing system in place.
- Putting a ‘Pay Now’ option into your e-mails when invoicing your client.