A healthy cash flow can be enough to make or break any business, but how do you keep your invoices in line without compromising your hard-earned relationships?
First, understand your customer
Easily accessible information from credit reporting services gives you the power to interpret any payment problems in line with historic trends, so you can bend and shift your approach. If the data shows that your customer has recent bad form when settling payments, for example, you can put tighter terms of repayment in place. Equally, if you know your client is historically good at paying the bills, you don’t have to start pulling your hair out on the first day of delays.
Agree expectations in writing
Don’t wait until payday to have the conversation – send official documents at the start of each project. Official Terms and Conditions may seem OTT, but they’re a simple way to outline how you want to be paid, how many days your customer has to pay, and what action you will take in the event of a late payment.
Don’t make it hard for someone to pay you
Sometimes the delay comes down to you – and the way you prepare your invoices. Make sure your paperwork is accurate and easy to understand, so you can limit any queries on the other end. Break down every cost and include all your bank details and contact numbers, even if you think your customer or supplier already has them.
You’ve worked hard to establish a good working relationship with your client contact – and you may not want to undermine it with uncomfortable money talk. If you don’t have your own accounting team to keep things separate, contact theirs. This can protect your day-to-day relations while still bringing money through the door.
Article by Alastair Grigg, Head of Platform Ventures at Xero