When you’re running a small business, the last thing you want to do is chase down unpaid invoices and send late payment reminders.
Between dealing with employees, new clients, vendors, and keeping up with the latest trends in your industry, all while trying to stay on top of your to-do list…it’s no wonder many small business owners struggle to get paid on time.
The Impact of Slow Payment on Small Businesses
Not getting paid quickly can have a huge impact on your business.
According to a BESA survey, over 92% of small business owners have had to deal with late payment issues. What’s worse: 37% of them even had reduced their own salary because they were waiting for past due invoices to be paid.
And it’s not just an inconvenience—it’s an opportunity cost: you’ll lose money, vendors, and enough cash flow for other projects (like hiring new employees or buying new equipment.)
This is a huge burden, especially when you consider how much more money you could make if you were able to get paid early—just look at these Fundbox stats: fixing late payment issues could increase your revenue by $31k on average.
While it may seem like late payments are simply part of the territory of being an entrepreneur, there are actually several practical tips you can implement to get paid faster, improve cash flow, and grow your business.
Check out our tips to start getting paid faster and more reliably:
1. Automate Invoices, Reminders, and Follow-Ups
If you’re a small business owner with limited staffing resources, automated invoices and reminders are a great investment. Industry data shows that the majority of invoices (61%) are paid on time, so simply sending invoices at the right time can help ensure you get paid quickly.
This is where automation comes in. Having a system that automatically sends invoices means your clients can receive and settle their bills in a timely manner—e.g., every first of the month or 24 hours after a service has been rendered.
It’s also worth noting that 61% of late payments are due to invoicing errors. Automation can eliminate mistakes, thus reducing delays in payments. What’s more, most invoicing solutions make it easy for clients to pay quickly, thanks to features like built-in payments, saved cards on file, etc.
In addition, invoice automation systems can help you follow up with late-paying clients, and they work well as part of the invoicing and billing process.
Not only do they save you time, but they also make sure you can consistently communicate with your customers, as well as get regular notifications if the payment is not made by the due date.
You can also set a reminder email, or phone call payment reminders. This is another way to reach out to your clients and keep them updated on their payment’s status.
2. Provide Flexible Payment Terms
Looking to minimize the risk of being stuck with outstanding invoices and having to wait for your customers’ payments? Here’s an easy way to do it: offer flexible payment terms.
Consider these ideas:
Offer a discount for early payment. This way, your client gets some financial reward for doing business with you and pays you sooner than they would have otherwise. For example, if you run a online store, you can offer a small discount on bulk purchases or offer free shipping if someone pays within a certain timeframe (say, 10 days).
Create a customized payment plan for your clients. That way, customers can pay for their services in easy installments over time. Let’s say you run a local business that sells home goods (like furniture or accessories). You can offer your clients interest-free credit pricing plans over ten, 20, and 30 months.
Offer automatic billing with auto-pay options so that clients don’t have to worry about remembering when their next payment is due—with digital invoices, it’ll just happen automatically.
3. Incentivize Upfront and Early Payments
If you choose to implement this, make sure your customers know exactly what’s expected of them and how much time they have to pay.
Let’s say that you’re a graphic designer who designs and prints custom t-shirts for your clients. You could typically require a 50% deposit at the time of booking, and then the remainder of the payment upon delivery of the finished product.
However, if you don’t feel comfortable asking for upfront payments from clients who aren’t familiar with your business model, another option is to offer incentives: discounts or freebies if they pay early or upfront.
4. Charge and Enforce Late Payment Fees
This could be a good solution if you’ve had issues with excessive late payments in the past. However, they can be tricky to implement. Not all states or countries will allow businesses to charge late fees, so it’s important to do your research.
Regardless of the payment method you’re offering, be sure to collect your customer’s contact information, and draft clear payment terms to protect your business in your contracts and client agreements.
Include the percentage or flat rate of the late payment fee. You can find industry-standard late payment fees or consult your state’s regulations to determine what you should charge.
5. Accept Multiple Payment Methods
One of the best things you can do to get paid faster is offer convenient payment options for your customers, so they have multiple ways to pay off their bill.
If you only accept cash and card payments, you’re missing out on a huge opportunity to increase sales and secure payment.
For example, you could use ACH payments. ACH transfers have lower transaction fees than credit card payments, so they save your business money. They’re a great alternative to check payments because of their security, and they’re simple to set up for recurring payments.
Meanwhile, digital payments such as SMS or Text2Pay can give your customers a convenient way to pay you—plus, they can do it with just a few taps.
These are just two examples of the many ways businesses can accept more payment options as a way to get paid faster. When deciding which payment types to accept, it’s best to think about your business needs alongside the shopping habits of your customers.
6. Use an integrated Payment Processing and Accounting Software
When you use accounting software and payment processing applications separately, it can be difficult to get a clear picture of your financial situation. That’s why it’s a good idea to integrate the two programs if you want to stay on top of your money—and whether or not you’re getting paid on time.
Stax integrates with the most common apps to help streamline and automate your business–and this is especially important with accounting software.
Stax helps get you paid faster. Automated invoicing, ongoing monitoring and real-time reporting are just some of the ways the company helps you streamline your business operations and increase cash flow.
Additionally, you can seamlessly track payments and know instantly which ones are complete and which ones are pending.
Final Words
Late payments aren’t just a minor inconvenience; for some businesses, not getting paid quickly can put a serious strain on cash flow. Fortunately, with the right processes and payment partners, you can reduce instances of late payments and get money flowing faster.
Learn more about how Stax can help your business get paid faster. Get in touch today.
