One of the major problems facing all small businesses and contractors, especially when starting out, is the problem of being paid on time. Poor cash flow management is one of the major reasons why small businesses fail. It does not matter if the business is making money, if it cannot meet its monthly expenditure then the business will fail. Ensuring that customer invoices are settled on time will not only ensure that the business can meet its running costs but also allows the business owner to plan future development.
Sign a contract
So how can you ensure that your clients or customers pay on time? One way of doing this is to get them to sign a contract before work begins. The contract will state the details of the work and how much you are to be paid. In the worst case scenario, having a contract makes it easier if you have to take legal action against a client.
Use electronic invoicing
Another way to get your clients to pay faster is to suggest that they either use a credit card or an electronic bank transfer. Making paying as easy and flexible as possible will encourage customers to pay on time. You may also request that your clients pay certain costs upfront. For example, you may want to receive payment for travel costs and other fees before the work is complete. It might sound counterintuitive, but charging a late fee may not be a good idea.
Some clients will pay on time if there are penalties for late payment, but it can sully the relationship between you and your client and if the client is likely to be late paying for your work they are also likely to be late paying any additional charges. Incentives to pay early or on time may work better. Offering a discount for early payment will encourage your client to pay on time, but make sure that you can afford to offer the discounts.
Prompt invoicing is important because this not only looks professional it also gives the client more time to pay. Let the client know when the bill needs to be paid by, as this will let them know that prompt payment is important to you. Automating your invoice system will help with getting invoices out on time.
Use invoicing templates
There are a number of online sites offering invoice templates and receipt templates. Creating your own invoices and receipts is simple and quick, this means that billing your customers, and acknowledging payment is less of a chore. To find out more about creating your own receipts check out this link here.
If a client is late in paying you could try contacting them in person or using certified mail to request payment, and as a last resort you may have to stop working until payment is received. If you have a client that is consistently late in paying you may have to consider whether the client is important to you or not. If the client is not that important then it may be better to find work elsewhere.
Running your own business, whether you are a sole contractor or a small business that employs others is hard work, however, you can take some of the hassle out of the administration by using online software to aid the billing process.