Last Updated on October 12, 2023
For many companies, accounts receivable collection can at best be described as a chore and at worst as an anxiety-inducing experience, where just one large delinquent customer can put a business in jeopardy. Whether it’s one unreliable customer or several, business owners regularly find themselves asking the question, “how do I get paid faster?”
altLINE has a wealth of experience optimizing accounts receivable collection for businesses through offering invoice factoring and A/R financing. As such, we quizzed our accounts receivable collection team to gather some advice for business owners trying to figure out how to get paid faster. Here’s what they had to say.
11 Ways to Get Your Invoices Paid Faster
1. Ensure Invoice Accuracy Through Invoice Verification
You might wonder what this has to do with getting paid faster. That’s a fair question, but in A/R collection, time is truly money. Any delay caused by an error on an invoice can prove costly and hinder cash flow due to ultimately being paid later than expected.
Check and double-check invoice accuracy through completing the process of invoice verification. Make sure payment terms, remit to addresses, and invoice destinations are correct. At year-end, further ensure accuracy by matching invoice payments with bank statements, a process called invoice reconciliation. In general, maintain a system that ensures your invoice and payment doesn’t get lost.
2. Get in the Habit of Dedicating Time to Payment Collection
All too often, business owners ship products, or provide the service, then cross their fingers and hope for the best. However, blocking off time either every day or every week to dedicate solely to collecting invoices can lead to discovering new methods to accelerate payment or at least ensure payment is submitted on-time. The more you’re on top of collection, the lower the chance your cash flow is affected by slow-paying customers.
3. Encourage On-Time Payments Through Offering Early Payment Discounts
Have some good customers that always pay on-time? Reward them! Offer them additional services that make them want to continue the behavior, or more specifically, discounts for early payment.
Early payment discounts can also encourage customers who take a while to pay to adjust their habits.
Say you’re working on net 30 terms and the respective customer continuously waits until the final few days of the cycle to fork over the cash. Reach out to them and try offering 2/10 net 30, which denotes a 2% discount if payment is submitted within 10 days. Your unreliable customers should hopefully realize that paying an invoice early is worth it to receive a discount.
4. Be Persistent, But Patient with Slow-Paying Customers
Collecting payment can at times be difficult no matter how solid your process; this is an inevitable aspect of running a business and selling products or services.
It’s easy to ignore and hope for the best when faced with delayed payments. While no one likes to face the likelihood of a write-off, the sooner you communicate concerns with a delinquent customer, the sooner you will resolve the issue. Don’t let a bad customer put you out of business, monitor all your customers’ payment behaviors and be prepared to respond to any negative trends.
However, remember that your customers likely have other vendors, their own delinquent customers, and their own cash balance to work with – smiling, maintaining a positive attitude, and listening goes a long way in facilitating payment.
However, just as they need to stay on top of making payments, you should stay on top of their progress and send reminders when needed.
5. Create an Email Template to Politely Remind Customers About Payment
One way to stay persistent is by having an effective communication plan. For instance, creating email templates to politely ask for payment will save you time in the long run and assist in avoiding having to charge your customers further late fees.
Invoice reminders are critical. Everyone forgets things once in a while, and your customers are no different. Make sure your business sends consistent reminders, not only after a payment is late, but also leading up to the due date. These reminders should be polite and informative, ensuring your customer sees them as both important and helpful.
6. Reduce Your Payment Terms
If your business operates on Net 60 or Net 90 terms and you’re struggling to keep cash on hand, you need to reduce your payment terms; a few reasonable alternatives being Net 15 or Net 30. This means the payment turnaround will be reduced, and you won’t be stuck waiting months for the cash to arrive. This can also keep your invoices more top-of-mind for your customers.
If long payment cycles or accounts receivable collection remains a challenge for your business, you might be a good candidate for altLINE’s invoice factoring or AR financing program. Contact us today and we’ll fill you in on how we help businesses accelerate payment and improve their financial health.
7. Offer Automated Payment
Automation can help your business stay on top of invoicing your customers, while decreasing the amount of time your team spends on collection. Using automation tools like Quickbooks, you can set up automatic invoicing, reminders, fees and more. These tools are affordable and usually supported by 24/7 tech support.
In general, business owners should explore automating and digitizing processes wherever possible to reduce manual labor and boost efficiency. Running your own business comes with juggling multiple tasks and responsibilities.
8. Use E-Invoicing Software
Speaking of boosting efficiency, electronic invoicing reduces manual labor, accelerates the payment process, and lessens the chances of human error. E-invoicing software is aimed to take this a step further by automating the invoice matching and validation processes.
9. Charge Late Fees
No matter how much effort and thought you’re devoting to optimizing accounts receivable, you’ll eventually deal with a customer who doesn’t abide by payment terms.
Rest assured that late fees are common, and your business should leverage them if you have late-paying customers. These fees incentivize on-time payment and help ensure your customers meet their due dates. However, before charging late fees, make sure you’ve notified your customers up front of the financial risk involved in late payment.
10. Have a Good Invoice Template
If you’re following all of these steps and you still feel like you’re dealing with an abnormally high number of unreliable customers, it’s time to get back to the basics.
Your invoice template is important. Ensure that it’s branded, professional and easy to read. You want your customers to take your invoices seriously, but also fully understand the bill. You can find pre-built templates for free online, or you can leverage your invoice automation tool to create custom templates.
Here are a few invoice templates that might be relevant to your business to help you get started:
11. Try Invoice Factoring
Invoice factoring is a form of alternative financing that converts your outstanding invoices into cash by selling them to a third party, or factoring company, in exchange for a cash advance. It’s a particularly popular financing method for small business owners looking to get paid faster and improve cash flow in the process.