Small businesses across the US rely on quick payments to maintain steady cash flow and cover expenses. Quick payments will improve the financial health of any company. This will also make your accounting process easier to maintain as you will have fewer open invoices and accounts receivables to maintain. Usually, business owners get a small business loan to cover their expenses if the invoices remain outstanding. If you want a customer to pay their bills on time, it is important that you send them invoices at the end of any transaction and on a regular basis to remind them of payment due.
Follow up on your open invoices so they do not go past the due date. If you are a small business owner or a freelancer, you need money to cover your expenses, so you do not end up slow paying your venders. Here are a few tips that will allow you to get Invoices paid quickly.
- Request a down payment
This is one of the easiest ways to get paid from your clients especially if you must outlay funds to get the project started. This method will help you get a portion of the invoice in advance. This is better for those projects which are long-term and can take months to complete. Getting payment in advance will help you pay for all the costs that you need to complete that project.
- Try to create small, simple, and clear invoices
If your clients are not paying you on time, there is a chance that the problem is in your invoices. It is important to make sure that your invoices are short, simple, and clear. Poorly designed invoices are never a good way to ask the client for payments. They can eventually lead to late payments. It is your duty that your invoices are clear and provide all the necessary information to clients.
- Send Invoices on Time
The sooner you send your invoices the quicker you will receive payments from your clients. If you have a small business or working as a freelancer make in your habit. Try to complete your work earlier than the agreed-on the due date and send invoices along with your last milestone. This way the work is fresh in your mind and if the client wants any changes you can make it easier.
- Set clear payment terms in advance
It is important to clear all the terms and conditions with clients before you take on order or start a new project. This way your client will agree to payment dates in advance and there is no confusion when the work or targets have been completed.
- Make sure that you accept more payment methods
As a small business, it is important to reach more clients through different payment methods. It will make your business even grow internationally. The flexibility of your payment methods will help clients’ payment methods easier. This will help you get invoices paid quickly. Try new payment apps like Zelle where customers can wire you funds instantly and at a very low cost for both parties.
- Provide a discount for early payment
Some vendors offer an early payment discount such as 2/10, net 30. This means that the buyer may deduct 2% of the amount owed if the vendor is paid within 10 days instead of the normal 30 days. For instance, an invoice amount of $1,000 can be settled in full if the buyer will pay $980 within 10 days. In this example, the buyer will save $20 (2% X $1,000) for paying 20 days earlier than the normal due date. If the buyer can do every 20 days, it will occur 18 times during a year (365 days divided by 20 days = 18 times). That means the company could save up to $360 ($20 X 18 times per year) each year by using a single $980 amount. Hence the annual percentage rate is approximately 36% ($360 earned divided by $980 used).
Looking at it another way, if the buyer had to borrow $980 from its bank for the 20 days at a borrowing rate of 6% per year, the interest for 20 days would be only $3.22 ($980 X 6% X 20/365). By paying $3.22 of interest to the bank, the buyer will save paying the vendor $20 and therefore will be better off by $16.78 ($20.00 minus $3.22). If this occurs 18 times in a year, the net annual savings will be approximately $301 [$16.78 X 18 times; or $360 per year saved minus the annual interest paid to the bank of $59 ($980 X 6%)].
- Factor your invoices
Invoice Factoring is a financial transaction and a type of debtor finance. In an invoice factoring agreement, a business sells its accounts receivable (invoice) to a third party (called a factor) at a discount. A company will often factor its receivable assets to meet its present and immediate cash needs versus waiting for payment based on original contract terms. Factoring invoices is also used to mitigate credit risk.
These are some of the key steps that will help you get invoices paid on time and quicker. If you want a smooth cash flow for your small business, you can flow these key steps or speak with BitX Funding’s account executives to determine the best method.
BitX Funding is the online marketplace for small business owners looking to fund a project. We specialize in connecting small business owners with lenders who will compete for your business. We believe small business owners drive the economy and we are passionate about helping your company reach its full potential.
You can reach loans specialist by toll-free at 1-800-824-2407, or email at email@example.com or applying online here and we can guide you on which loans are the best fit for your business.