Late payments are more common than you might think. A 2018 study by Atradius found that more than 90% of respondents report late receivables, impacting 64.1% of the companies surveyed, and leading most of the firms to correct their cash flow, to postpone payments, or even to lose revenue. Not many businesses can survive long without plenty of cash on hand.
Late payment is a very common problem with serious consequences, but what are you supposed to do to fix it? We've put together a list of best practices for getting paid on time, to help your firm be more proactive. If you stick to this and have the right tools for the job, you'll never have to stress again about unpaid receivables.
1.) Use an Accounts Receivable policy. It’s easier to collect payment when you already have an established policy for receivables. Make it an important part of your contract, and guarantee that your client knows exactly what the policy entails. Having an A/R policy also allows you to create a schedule for regularly collecting outstanding payments.
3.) Build an engagement letter. No matter how long-term the client, it's important to put together an engagement letter that is signed by the client. The purpose of the letter is to set clear expectations and open communication for the scope of the project and fee structure, which can prevent many problems down the line. Outline the services included in the initial fee, and how the client will be billed if other services are requested.
4.) Structure your invoices to the client. Keep a record of how the client prefers to be invoiced: which fee structure are you using for the engagement, who should receive the invoice, and what information the invoice should include (e.g. a purchase number or a contact number). Then, build a custom invoice template for the client in your billing software, that you can then reuse to prevent any surprises.
5.) Track time and expenses in the same software you use for billing. Dedicate more time to your firm, and less time to processing payments by automating the process. When your time and billing software is one system, it eliminates the wasted time spent on double-data-entry to build invoices. It also ensures the data entered to build the invoice is accurate, with no room for human error.
6.) Send your invoice immediately. The sooner you invoice, the sooner you’ll get paid, so make it your firm’s priority to send an invoice promptly. No matter how busy your company gets, or how or the project’s revenue, send an invoice when your client’s project is complete.
7.) Always contact clients when their payments are outstanding. Never worry about whether you’re contacting your client too soon, or too frequently, about an unpaid invoice. If you’ve upheld your firm’s side of the contract, but your client hasn’t upheld theirs, then it’s in the interest of your business to follow up with them.
Once you’ve put these best practices for A/R into place, you’ll never again have to worry whether your clients will pay their invoices in full and on time, so your business can work more efficiently, more accurately, and more profitably.
If you’re ready for a project management software that can automate your invoicing processes, and you’d like to see what a top-tier solution can offer, please request a free demo of BigTime today.
About the AuthorMore Content by Matthew Corey