Invoice Payment Terms: Top 7 Tips
Small business cashflow depends on prompt payment. Xero have analysed over 12 million invoices to discover some revelations to getting paid on time. They also asked the small business community for their tips & tricks and we are happy to be able to share their insights with you.
Should you change your payment terms?
If you think your payment terms have no impact on when people pay you, turns out it actually has a very real effect on when you get paid.
Debtors pay 2 weeks late
Regardless of whether your payment terms are due immediately or due in 30 days, on average invoices are paid two weeks late.
Get paid in 30 days or less
If you're aiming to get paid in thirty days, you should make your payment terms 13 days or less.
You're not alone
Over 1,500 of the Xero Community shared their experiences with invoicing & payments. Here's some of their helpful suggestions.
Q: What is the most challenging part of invoicing?
A: Getting invoices out on time when you are busy, following up on overdue invoices & splitting payments that don't match invoice amounts across multiple invoices. - Clint W
Q: What is your best tip for getting an invoice paid?
A: COMMUNICATION! I've found just sending overdue reminder after reminder doesn't really get me anywhere. Taking a couple of minutes out to call them to follow up a reminder sent has worked for me 98% of the time. - Willow S
Q: What's one thing you wish you had known about invoicing when you started your company?
A: One thing I wish I knew? I tracked time (I was used to that), but was not so good at tracking all those incidentals which need to be on-charges. Also had to learn a lot about following up to actually get paid. - Andrew C
Q: Is the ability to send an invoice while you are out and about important to your business?
A: Yes, in my experience, the closer the gap between providing the service and issuing the invoice, the more like it is you'll get paid quickly as customers are still in the "feeling delighted/grateful" zone. - Gina G
Go on, get that money!
Getting paid and having a healthy cash flow is the lifeblook of every small business, but it's not always as easy as sending an invoice at the end of the month. You'll be laughing straing to the bank with these top invoicing tips.
1. Discuss payment terms before you get started
Getting this sorted upfront means that there is no confusion down the track. It also sets the clients expectations around payment before you start the work.
2. Keep detailed records of inventory and time
This saves time when it comes to creating the invoice and makes sure you don't miss anything. It also means if things are going over budget you can let your client know, instead of sending them an expensive surprise at the end of the month.
3. Make the invoice clear and easy to understand
List the details of the job in a way that makes sense to the client, any confusion could create a payment lag. It's also god to personalise your invoice with your business logo - it helps carry on the professionalism of your work.
4. Set appropriate payment terms
If you need to receive payment within 30 days, our data reveals that you will need to set your payment term at 13 days or less. Keep in mind that on average, debtors pay invoices 2 weeks after the due date.
5. Address the invoice to the person paying
Make sure your invoice goes straight to the person who makes payment to avoid getting lost is some elses inbox. If you're unsure exactly who that is, give them a call - it pays to know the person paying the bills.
6. Invoice as soon as possible
Send your invoice as soon as possible, the sooner a client receives an invoice the sooner they will make payment. It also means they will receive it when the value of your work is still fresh in their minds.
7. Keep on track with debtors
The squeaky wheel gets the oil. When things become overdue send reminders, monthlu statements or make a phone call. It will help remind your client that you are serious about getting the invoice paid.
Having a process that helps steamline invoicing can reduce the amount of time you spend collecting your hard-earned money.