Trouble Getting Paid? Try These 3 Invoice Tips to Improve Your Cash Flow

Payment issues can be among the most grueling things an entrepreneur deals with. Getting paid in a timely manner can be crucial to keeping your own books on track, but haggling with clients over their payment habits can be deadly to your own customer service efforts. While there are some delinquent payers you’ll want to eventually sever ties with, there are many others for whom a late payment is simply an oversight.

I started my online invoicing company Due to help with this. I've noticed that of the 2.5 million invoices that have been sent through my company, that around 20% of all invoices are paid late. That's almost 500,000 invoices that have been paid, even worse... almost 50% of those still haven't been paid.

The first step in avoiding awkward conversations is to include verbiage in your invoices that motivates your customers to pay on time. Once you have these items in writing, they’ll also be easier to enforce. Here are three invoicing tips that I've found to help you get paid on time;

Include Specific Deadlines

Some businesses choose to refrain from putting a due date on each invoice, assuming most customers will know that payment is due within 30 days. However, you’ll notice many companies that deal with hundreds of thousands of customers provide set due dates on their bills. Those due dates give customers a deadline to keep in mind if they choose not to pay immediately.

If your invoicing software doesn’t build in due dates, consider simply specifying that payment is due a set number of days from the date issued. Many businesses choose 30 days, but 21 days is often a more effective turnaround time, since the words “30 days” may be overlooked.

Charge Late Fees

Late fees are an effective way to motivate your customers to pay on time. Some businesses set one amount due by a specific date, followed by a higher amount if paid after that date. This sends the message that they can save money by paying the amount on time.

Another tactic is to charge interest on the overdue amount. For each day the payment isn’t made, your debtors will be required to pay a percentage extra to make up for the amount you’re losing on that debt. While this is an effective way to get paid, it tends to give permission for those invoices to be paid a month or two late. The client sees it more as a loan than a late fee.

Be Friendly…Until You Must Be Firm

If a customer is only a week or two beyond the due date, it’s important to avoid making assumptions. You’ll likely find over the course of growing your business that some customers habitually pay late. The first time a payment from that client is late, you may fear no payment will be remitted, but if you use firm language, you’ll likely regret it when they reply that the missed payment was simply an oversight.

Set a specific number of days in which you’ll allow late payments to go before you begin getting firm. The first late notice should be friendly, simply serving as a reminder with information on how to pay the bill. The second notice can notify the customer of the late fees currently due, with the third notice becoming a little firmer. Don’t threaten “further action” until sufficient time has passed that you’re sure payment is being deliberately withheld.

Striking the right balance between friendly customer relations and going after the payments you’re due can be difficult. With the right wording in your invoices, you can avoid embarrassing your customers while also reducing the number of unpaid invoices on your books.