This post is all about getting the hard-earned money in your pocket! Yay! There are few things that give a business owner more comfort than seeing the bank account reflecting your efforts. I want to share with you some tips and tricks for getting paid efficiently.

Some of you folks running retail businesses might be like, “What? Getting paid, no problem, just takes a few days for cash to hit my bank account after a sale.” Well, this post is mainly focused towards service-based businesses, but I bet there will be a few things that my retail friends can also pick up.

Here are six things to consider to help you manage your cash flow and invoicing cycle:

How do you customers pay you?

There are many different payment methods to choose from: credit card, debit card, bank transfer, checks, cash, etc. Some of these options will be in your bank account the next day, and some will take a longer time.

Consider if you will accept all or only a few of these payment methods. Remember that the PAYING side will typically choose the slowest form of payment because they want to reserve cash.

If you provide a recurring service, consider setting up automatic credit card charges. This typically helps customers and businesses ease the pain of invoicing. Many credit card processing services have this option available now.

When will your customers pay you?

Determine your payment terms. The long-standing standard invoice terms are “Net 30”. If you don’t know what Net 30 means, it means that the Net amount of the invoice (full amount due) is due 30 days after the invoice date. Some industries have different standards (Net 45 or Net 60), so I’d be curious if you have experienced anything different. Does your industry have standard payment terms?

If you want to accelerate cash receipts, you could consider discounting your invoice slightly in order to receive the cash sooner. The most common option for this is “2/10 Net 30”. This means that you would provide a 2% discount if the customer pays you within 10 days, but full amount is due at 30 days. You can play around with the discount depending on what works for you. Anything shorter than 10 days could be difficult for a company to process if they have a purchasing department. Consider the loss of revenue (the 2% discount) balanced with the access to the cash – is it worth it for you?

If you end up dealing with very slow-paying customers, consider charging interest on the invoice. Penalties tend to put fire under the belly 🙂

How will you deliver invoices to customers?

How do  you get your invoice into the hands of your customer? Do you mail it? Email it? Consider how long it takes for your invoice to get into the hands of the payer. The customer may have policies in place where they require the invoice to be paid 30 days after receipt (not invoice date). This could increase time for you to get paid. Get the invoice to them as fast as you can within their rules.

If this is the first time you have done business with a customer, consider calling the department and asking if they need a W-9 (Request for Taxpayer Identification Number and Certification). Many companies require this form before they will set you up as a vendor in their Accounts Payable system. Have one on the ready and send it along with your invoice so they don’t have any reason to delay your setup.

If you have a more casual relationship with your customer, consider emailing them or calling when you are sending your invoice. Don’t be a pest with the calls, that doesn’t go over well.

Do you know the invoice rules?

Ah rules, no one likes these type of rules, but customers will put some intense rules into place in order to slow down their invoice paying timeline! Yes, it’s true. If you mess up something on the invoice, then it could delay your payment, and sometimes the company won’t even tell you there was a problem. They will wait for you to follow-up! For example, if addresses don’t match, the PO number was one digit off, or the invoice was emailed instead of mailed (in duplicate) your invoice could be delayed! Seriously, all of these things have happened to clients! READ the details of any PO (purchase order) you receive. Some onerous rules are there to throw you off track.

Another key rule that may apply is that a service needs to be rendered before you can invoice. Therefore, I try to invoice as soon as the contracted services has been performed. Make sure to include everything that the customer requires in the invoice (i.e. they could want timesheets, labor rates, travel expenses, receipts, etc). They will specify what is required if they need more detail. Don’t provide information that is not necessary or requested (this can cause unnecessary questions).

When to follow-up?

I know no one likes to look like they are desperate for money, but sometimes we need to get paid! It doesn’t hurt to give the company a call and make sure your invoice is in the pipeline. I wouldn’t ever get super pushy and call a thousand times, but one or two calls would be perfectly acceptable for a new customer that you haven’t dealt with before. Why not call a few days after you sent the invoice and ask for the Accounts Payable department and say, “Hi, I sent and invoice a few days ago, and I just wanted to make sure it was received. Also, this is my first invoice to you guys, so I wanted to make sure everything looked good.” Be friendly, sometimes Accounts Payable folks HATE their lives, so have grace with grumps. You can ask about their standard payment practices if it is not listed on the PO.  If you don’t receive a payment on the promised date, consider another follow-up call. Some companies are lame and they will SEND the payment on the due date, so this is where payment method options come into play. If you have a notoriously slow-paying customer, consider doing a regular call.

Are you keeping track?

It will help you out to keep a list of the invoices you send. At the end of each month, review your outstanding invoices. Most accounting software options will have the ability to create an “accounts receivable” report. This will help you see what invoices are outstanding and need to be received. Make sure you check for payment receipts before doing a follow-up. You will feel dumb if you call a company about an outstanding invoice and they say, “Oh, our records show that the check cleared our bank 15 days ago”.  (awkward!)

As always, if you have any tips that have helped you improve your cash flow, share them with me! I’m always up for new knowledge!

Disclaimer: This blog and the linked videos are intended for educational purposes and should not be taken as legal or tax advice. You should consult with your financial professionals about your unique financial situation before acting on anything discussed in these videos. Clara CFO Group, LLC is providing educational content to help small business owners become more aware of certain issues and topics, but we cannot give blanket advice to a broad audience.