Research suggests more than one-fourth of start-ups fail due to a cash crisis. While profits look appealing on an income statement, cash pays the bills. If you’re struggling to convert your sales into cash fast enough, consider the following ways to get your business paid faster.
Your clients aren’t obligated to pay you for completed services until you send a bill. To get paid faster, invoice customers immediately after finishing a sales transaction. To be even more efficient, email your invoices immediately after creating them through Xero. Posting your invoices only delays payment — firstly there’s the time they take to reach your customers, second, there’s a high chance your customers will put your invoices in a drawer and forget about them.
In your payment advice, encourage your customers to pay you using a payment service such as Stripe, rather than by check. Checks take days to clear, can get lost in the mail and can bounce. If you prefer electronic payment — say this in your payment advice. And believe it or not, a recent study suggests merely adding things like “thank you” or “please” on your invoices may boost your odds of getting paid by 5 percent.
Give your customers all the information they need as soon as you invoice them. Otherwise, your customers might use lack of documentation as an excuse to delay payment.
Automating the process gets invoices into the hands of your clients faster. Our preferred provider of this service is Bill.com. Bill.com works with Xero and Quickbooks, and offers excellent customization options. In addition to electronically sending bills, Bill.com can also provide customers with payment reminders and links to online payment systems.
To entice clients to pay you faster, offer a nominal discount for early payments. This amount can be a percentage of the total invoice. Even a 2 percent discount can motivate customers to take action.
Do you currently give credit customers the option to pay for goods or services over a 60- or even 90-day period? If receiving cash for sales transactions is your priority, consider condensing your credit terms by swapping 60- or 90-day credit terms with 15- or 30-day ones.
For business owners, waiting on cash from customers can be an agonizing, frustrating experience. Xero has done an amazing job of being able to tailor invoicing preferences to best suit the user, making it clear why they're regarded so highly by business owners. If you'd like to find out how our cloud accounting team can help you get paid faster, please reach out to us!