5 Strategies for Getting Paid Fast and Managing Your Cash Flow
Do you have problems getting some of your customers to pay on time? Does your cash flow ever run thin because of this? Here are some surefire strategies for managing your cash flow and getting your customers to pay you so fast that sometimes they’ll pay you before you even do the job.
1. Make Paying as Easy as Possible
However your customers want to pay should work for you. So make sure you’re set up to handle multiple forms of payment including debit, credit, ePayments, and even good old-fashioned checks if that’s how some of your customers still like to pay.
Set Up ePayments
A lot of your customers probably like the convenience of ePayments, and you should too because it’s basically money arriving at your bank account instantly—no waiting around like when you wait for checks to clear.
ePayments come in many forms including:
- accepting credit card payments in the field with your iPhone or iPad
- allowing your customers to pay online
- setting up automatic payments for recurring work
“The easier you make it to pay, the more likely your customers are to send in their payments.”
Vault Your Customers' Credit Cards
One of the best ways to make it easy for your customers to pay you is vaulting their credit cards. This way, you only have to ask for their credit card information once, and then you keep it on file in a high-security virtual vault.
Vaulting also happens to be one of the best ways to ensure you get paid fast. “Clients’ credit cards can be charged immediately after the work is done,” explains Chris Bertels, an accountant, business systems consultant, and Jobber Certified Advisor. “This is especially useful for service businesses with subscription-based models. Good examples of this are housecleaning or lawn maintenance businesses that perform work for a client on a weekly basis.”
Vaulting credit cards is also a handy way to initiate payment before or even while you’re doing a job. This makes it ideal for:
- collecting a down payment up front,
- offering customers the option to prepay in full, and
- setting up weekly or monthly retainers with your regular customers.
Interested in trying ePayments?
Jobber Payments makes accepting payment in the field easier than ever
Start your free trial and find out for yourself!
Accept Payments in the Field
If your customers are around while you’re doing the job, set yourself up to accept payments in the field. Stores expect their customers to pay on the spot; why shouldn’t you? Also, a lot of them will appreciate the convenience of being able to pay you right then and there. And the more often you get paid fast, the less time you’ll need to spend on chasing after payments.
2. Use Invoicing Best Practices that Motivate Customers to Pay on Time or Even Early
So, you did the job but didn’t get paid up front… It’s not ideal, but no worries. You can increase your chances of still being paid on time or even ahead of the due date by using invoicing best practices that have a knack for enticing customers to pay up.
Email Invoices With "Pay Now" Buttons
Nowadays, plenty of invoices are designed to be delivered by email, and some of them include buttons or links that customers can click on to “Pay Now.”
Accountant and Jobber Certified Advisor Chris Bertels talks about the benefits of adding a pay now button to invoices: “When clients receive one of these invoices, they can click on the link to enter their payment information. This is much more efficient than traditional, paper-based invoicing.”
Not only does a “Pay Now” button make it easy to pay, but it’s also a pretty respectable motivator for customers to pay immediately.
Use these Research-Proven Best Practices for Invoicing
Due.com analyzed 250,000 invoices and came up with the following findings:
- Put your logo on your invoice.
If you do, you’re 3 times more likely to get paid.
- Specify the Due Date.
It can be tempting to use a generic statement about due dates on all your invoices, something like, “Payment must be issued within 30 days upon receipt.” Don’t do this—it doesn’t seem to convince people of the importance of paying the invoice. Instead, include the specific due date for the specific invoice. If you do, you’re 8 times more likely to get paid on time.
- Include invoice payment terms.
An important part of a professional invoice is a clear, polite statement about your payment period and what will happen if the customer doesn’t pay on time. If you put payment terms on your invoice, you’re 1.5 times more likely to get paid on time.
Optimize Your Invoice Payment Terms
Payment terms work best when they’re short, clear, easy to understand, and easy to spot.
If you’re signed up for ePayments in Jobber, your customers can pay online by clicking the “Pay With Credit Card” link in the invoice.
Payment Terms Wording
Research on payment terms has found that the wording definitely matters:
- Say please and thank you.
The presence of “please” and “thank you” in the payment terms wording increased the percentage of invoices paid by 5%. And customers also paid faster.
- Don’t use accountant words like “net” and “payable upon receipt.”
Customers paid more often and faster when they saw the word “days” instead of “net.” Also, “payable upon receipt” wasn’t as effective as specific terms like “28 days” or, as we already mentioned, a specific due date statement like “Due Date: March 31, 2016.”
A Recommendation for Your Payment Period
Payment periods vary by industry and even country, but Xero has an interesting recommendation about a payment period length that may be the most effective. Their invoice research showed that customers were an average of two weeks late paying their invoices. So, if you want to get paid in a month, they recommend changing your payment period to 13 days.
Discounts and Penalties in Your Payment Terms
Our friends at QuickBooks recommend that you consider a small discount, such as 2% off, for customers who pay you before their invoice is due. Another option QuickBooks recommends is an interest penalty for those who pay late. Interest penalties seem to lead to two things: you might get paid slower, but overall, a higher percentage of your invoices will get paid.
Use this Free Invoice Template We Made You
Based on the insights we pulled together for this article plus the invoice templates we have for our own customers as part of our Jobber invoicing features, we’ve put together a free invoice template for you, complete with the wording you can tweak for your own payment terms.
3. Streamline Your Invoicing Process so You're Never the Holdup
It’s easy to blame late-paying customers and say they’re the ones with the problem. But let’s face it; sometimes you’re the one with the problem. Make sure you’re not the holdup by streamlining your invoicing process. In the first two sections of this article, we talked about the importance of:
- making it easy for your customers to pay you,
- aiming for immediate or advance payment whenever possible, and
- using invoicing best practices that motivate customers to pay on time or even early.
These are all solid ways to streamline your invoicing process. Now, here’s a couple more.
“Believe it or not, your clients do want to pay you. It may be you who is making it difficult to do so. Do something about it!”
If You Haven’t Already, Quit Paper-Based Invoicing
Invoicing with paper and mail is just plain cumbersome. The first step in moving away from paper-based invoicing is to send invoices via email. If you’re ready to take your invoicing to the next level there’s good, affordable software (including, yes, Jobber) that makes it easy to do your entire invoicing process online way faster and way more efficiently.
What Can You Do With Invoicing Software that You Can't Do With Paper?
- Make and send invoices almost instantly.
- Email invoices with a “Pay Now” button.
- Prepare and send several invoices at once with batch invoicing.
- Track your invoices and run reports with a few clicks.
- Get a reminder when you’ve forgotten to invoice for a job.
Put a System in Place to Ensure Timely Invoicing
A system for timely invoicing combines your invoicing policies and processes with software that will make all this invoicing work easier to do. For example, say you want to start a policy that all staff will invoice immediately after they complete a job. Invoicing software will make it easier for everyone to follow this policy.
Every system will have its unique parts depending on your business, staff, customers, software, and you’ll need to decide what pieces you want to use and how to put them together. Bottomline though? You need a system. It doesn’t have to be complicated or formal. And the results—getting paid fast and boosting your cash flow—are worth the effort. If you already have a system in place, awesome! Good for you. Every once in awhile, take some time to evaluate it, make sure it’s working well and think about how you could make it better.
For example, what if your policy is to invoice immediately after each job, but your staff sometimes forget to do this? If so, you could look into the reminder features in your invoicing software and make sure all staff gets reminders to invoice.
4. Follow up with your customers on late payments
With the one-two punch of tracking your invoice statuses and using a collections process to follow up on late payments, you should be able to cut down on those unfortunate incidents where you’re paid late or not at all.
“The older your invoices get, the less likely you are to collect. So follow up early on late payments.”
Track Your Invoice Statuses
Tracking invoice statuses is your early warning system for late payments, so make it a habit to keep an eye on those invoice statuses. This is something that’s easy to do if you’re using a good invoicing software.
Use a Collection Process
Every business needs a collections process, says accountant and Jobber Certified Advisor Julie Babcock-Hyde. Like your system for timely invoicing, you need to figure out a collections process that’s right for you and your customers. Experiment with it, and don’t be afraid to rejig it if you find it’s not working.
Every Monday, Barry hops into Jobber to check on invoice statuses and track payments. He then handles his almost-due payments and late payments like this:
What’s Barry’s Process?
- One week prior to the invoice due date.
Resend the invoice by email with a reminder that the invoice is due in one week.
- One week late.
Resend the late invoice by email.
- Two weeks late.
Pick up the phone and have a friendly talk with the customer about the late payment.
- Three weeks late.
Turn up the pressure with a more sternly worded email and phone call.
- Four weeks late.
Notify the customer by email and with a print letter in the mail that he will not receive any more service until he pays his late invoice in full. (Barry also tells his co-workers that the customer is “cut off” and notes this in the customer records too.)
Track the Payment Patterns of Your Customers
Take the information you get from your invoice status tracking and collections process to look at your customer’s overall histories and pick out their payment patterns. It should be obvious to see which ones have trouble making payments, so you can get those bad apples out of the barrel if necessary.
5. Use a Cash Flow Budget
If your business is growing and it’s challenging to stay on top of your inflow and outflow of cash, it might be time to start using a cash flow budget (also known as a cash flow forecast).
A cash flow budget is different than your regular budget in that it predicts and tracks when cash will actually arrive at or leave your bank account. For example, if you invoice your customer for $1,000 on April 15 but you know she isn’t likely to pay until May, your cash flow budget puts that $1,000 in your May revenue.
With a cash flow budget, you’ll have a much more accurate view of when your money is coming and going. It’s a mighty tool for making sure you have enough money to take care of your expenses during leaner months, and it can be handy if you run a seasonal business and pull in most your revenue in just a few months out of the year.
Use Your Payment Patterns to Predict Customer Revenue
Earlier in this article, we talked about the value of tracking your customers’ payment patterns. Here’s another reason to do this: if you have a good handle on payment patterns, it will help you to build a more accurate cash flow budget with solid predictions about when your customer revenue will arrive.
For some excellent advice on how to set up and use a cash flow budget, see this Green Industry Pros article on cash flow budgeting in the landscape industry.
May Your Cash Flow be Strong and Consistent
While an up-and-down cash flow is a common problem for businesses both small and large, it doesn’t have to be a common problem for you. We hope the strategies we’ve outlined in this article help you get paid fast and produce a strong, consistent cash flow.