Entrepreneurs often underestimate how long it can take to get paid. Whatever the reason for late payments, it's another headache taking your focus away from what you really love about your business.
We looked to our Invoicing by Wave free invoicing software to find insights on what works best to put money in your pocket -- fast. Here are some simple strategies you can adopt to help encourage timely payment and even speed up the process.
1. Know the best day to collect payments. Sunday is the best day to invoice clients, while Saturday is the worst. If you must invoice during the business week, avoid Thursdays -- they're slow as mud.
2. Invoice at the right time of day. People who invoice clients between 7 and 9 a.m. get paid, on average, five days faster than people who invoice in the middle of the day. Next best: Between 7 and 9 p.m.
3. Credit cards help cash flow. Small business owners who accept credit card payments (Visa, Mastercard, American Express) get paid on average, almost two weeks faster than users who require payment by cheque. This is based on what we see with Payments by Wave, our credit card processing solution, but is likely true of other services with similar features and costs.
To help reduce the amount of time you spend chasing payments, combine these strategies with the old standbys:
- Always develop a contract with clear payment terms, even when working with a friend or close colleague.
- Consider asking for half of the total amount upon beginning a new project as a sign of good faith.
- Rather than stating "payment due within 30 days," include a specific due date and charge interest on late payments.
- Invoice early and send a prompt and friendly reminder when the due date has passed.
- According to general wisdom, your customers can only get through 50 emails a day, max. So if you don't use software that confirms when an invoice has been viewed, make sure you follow up by phone within a day or two to confirm receipt.
As frustrating as not being paid on time (or at all) can be, resist the urge to rant or complain publicly online. Remember, the late payment could be a rare and honest mistake, and you run the risk of appearing unprofessional to prospective clients when you vent on a public forum.
That said, nobody likes dealing with late payments and it can be unsettling to confront customers who won't or can't pay, especially if you know they've been struggling. But don't be afraid to protect yourself. After all, cash flow is king for small businesses.