6 Simple Tips to Prompt Invoice Payment

Posted by Aaron Zahedani on Mon, Jul 15, 2013 @ 07:45 AM

A checklist you can use:Prompt invoice payment

Consider these 6 simple tips to promote prompt invoice payment of your outstanding invoices and help you maintain positive cash flow. 

1. Know and love your customer

Seems obvious?  What better place to start by remembering that an excellent relationship with your customer, or someone in the Accounts Payable department will help facilitate a prompt and easy payment process.  Should a problem arise you will be able to sort out payment terms and chase any outstanding payments.  Small businesses cannot risk upsetting their large customers by demanding payment.  Equally don’t be ‘bullied’ by large corporations just because you know payment will eventually come.

2. Agree upon payment terms prior to your first order

By agreeing payment terms in advance, you can plan your cash flow accordingly.  Many small businesses are excited to be supplying large corporations, and rush into agreeing to provide goods or services with no terms and sometimes no contract.  Some customers will insist on terms of up to 90 days.  If entering into such a relationship you may consider negotiating a discount with your client in exchange for faster payment. This way, you trade some of your profit margin for prompt, reliable payment. Be aware that this option can interfere with other forms of financing, so assess all your different options.

3. Check your invoicing is prompt and correct, and matches the information your customer needs to process payment

Any action that slows the payment process could lead to payment issues. Organization is key. The faster that the billing department generates invoices and sends them to the customer after a product or service is delivered the sooner payment will be received. Invoicing errors can be a huge contributor to long payment cycles. Invoices might not include all the information needed for your customer to process, which can, in turn, invalidate the invoice meaning you have to start again.  

4.  Understand any required online submission process for invoices                  

Many large corporations have implemented online vendor sites, requiring a login to submit invoices, and check the status of upcoming payments. It’s extremely important that you know how this system works and understand the right process for accepting purchase orders, issuing invoices, and implementing correct payment bank account details. It is important that you take the time to understand the individual customer protocol, avoiding any delays in the payment process.

5. Don’t be slow to react to overdue payment

Clearly you need to be paid for the service/product you have provided so make sure that you respond swiftly and efficiently if a payment becomes overdue. However, approach overdue payment carefully; aggressive attempts at collection & enforcement can often backfire on your relationship with your client, especially for small companies with a relationship with large businesses.  This kind of negotiation should be handled with care. Often the problem is the result of an error in a department that your regular contact has no access to within a huge organization. Try to work out problems through your regular contact, rather than going over their head.

6. Consider working with a factoring company

A great way of improving cash flow is to work with an invoice factoring company. Recently, factoring has become a major source of working capital. Factoring is a viable solution for late payments; Factoring converts unpaid or late paid invoices into cash, raising money on outstanding invoices and advancing cash quickly against them. In addition factoring means that the factor can manage your accounts receivable and receive payment on your behalf.

Some delays in payments, such as extended payment terms, cannot be fixed so easily. As mentioned, long payment terms arise as a consequence of being a supplier to a large corporation. Waiting on long payment terms can potentially affect your ability to grow, especially in fast moving industries where waiting for three months for a big client to pay can have a negative impact on the ability to take on new staff, or increase business with new, large corporate customers.

Contact us today to find a solution to your immediate cash flow problems.

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Topics: Cash Flow, Financing Government Contractors, About Invoice Factoring

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