10 ways to get paid faster.

“Hey, it’s me again. Just checking to see if you’re still in the land of the living and if so, can pay your invoice, please?” 

If your customers seem to drop off the face of the earth as soon as you click send on their invoice, the bad news is you can’t blame gravity, but the good news is it can be managed.

Managing the gap between the money coming in and out of your business is critical for your business’s viability, particularly for small business owners with limited customers. The average number of days taken for a business to receive payment for their products or services is called debtors day. Keeping track of your debtors days is crucial in understanding potential cashflow gaps and how you can budget for them. The game of debtors day is all about making your number as small as possible, but first, you need to know what that number is. 

Orbit Team Member Typing On Computer In Sydney Office

How to calculate your debtors day.

The debtors day formula: (Year-end receivables amount ÷ annual sales) x 365 days = average debtor days.

For example, an IT consultant has in her terms and conditions that payment is due 21 days after the invoice date, however, she doesn’t know her average payment time.

Trade debtors at 30 June 2020 = $35,000
Annual sales for 2020 = $478,000
(35,000 ÷ 478,000) x 365 = 26.7 days

The IT consultants average payment time is 26.7 day, making it well overdue. Armed with this knowledge, she can either alter her cashflow planning according to the actual time frame or take steps to reduce the average number of debtor days. If the latter is more up your alley, here are some tips on how to hone in on your debtor days and get paid faster.

Orbit’s Founders Seated In Sydney Office Working On An Ipad

How to get invoices paid faster.

Hit refresh on your payment terms.

To start narrowing in on your debtors day, update your invoice payment terms to ensure they are impossible to miss and misinterpret. While it may go without saying, be sure to include your bank details on every invoice as well.

Schedule in your admin.

Your customers can’t pay an invoice they never received, so while administration might not sound like a good time, it will pay for it later. Setting aside designated time to complete your administration duties means you can send your invoices in a timely fashion.

Send it to the right person.

It is easier for your customers to erase the invoice from their memory if they never see it, so be sure to address your contact when sending the email. Bonus points for sending the invoice to multiple relevant addresses, like your contact and the accounting department, to increase the odds.

Leverage technology and automation. 

Sending notifications manually is not only a time killer, but it allows room for you to fall behind schedule and stretch out your debtors day. Take advantage of technology like Xero, and allow automated invoice reminders to do the hard yards for you by notifying your customers when invoices are both due and overdue.

Make it as pain-free as possible. 

Life is complicated enough, your customers don’t need any more hoops to jump through so make the payment process nice and easy. Clearly list all your payment terms in your invoice, and it never hurts to add extra information. So if the payment is due in seven days, why not chuck in the actual due date as well?

Entice them with irresistible offers. 

Think of the last time you left a good review out of the kindness of your heart, and now think of the last time you left a review for a freebie. We know marketing and sales incentives work, so why not provide one for early payments. It’s hard to say no to a 5% discount if all you have to do is pay the invoice within five days.

Let the people choose. 

Credit cards, Paypal, and mobile transfers, have you ever used them? Chances are your clients have too and naturally, they will have their preferences. Make payment a straightforward process by offering them several methods, including a couple of online options.

Be a most gracious host. 

Offering instalment payment plans is a simple and easy way to be more accommodating to your customers. Now before you consult a physio from all that bending over backwards, this needs to be a mutually beneficial arrangement. When it comes to debtors day, it is more convenient to have invoices paid in instalments as opposed to receiving a whole invoice late.

Have clear boundaries. 

You can have the best customer service in the world and still politely decline to be taken for a ride. If a customer has outstanding invoices, don’t go offering them unlimited credit. Instead, request a part or full payment before providing any additional goods or services. You can also protect yourself from these sticky situations by including the right to refuse further supply in your terms and conditions.

Establish strong relationships. 

If things go south, your relationship and communication with your supplier might be critical to your business. If you are on friendly terms, your suppliers will be more inclined to help you if you should ever need an extension on your bills. Better yet, you might be able to negotiate the terms to suit your debtors day and cashflow.

Orbit Team In Conversation At Sydney Office

Need a hand in reducing your debtors day?

When times are tough, getting paid on time can become an even greater challenge. Make the most of any business troughs by adding payment options, refreshing your terms and conditions, and brainstorming how you can simplify the payment process for your customers.

If getting paid on time is still a pain in the neck, Orbit is here to help small business owners implement additional payment options, update their software, and improve their business systems to reduce their number of debtor days. Additionally, we can also compare your debtors day to industry averages and discuss how to manage cashflow through challenging periods. 

If you want to make more possible by improving your cash flow, book a chat or get in touch today.