Help your customers to pay you on time

Getting paid on time is critical to the success of all businesses – even more so in during economic recession and when credit is in short supply.

It is important to agree payment terms with customers prior to commencing any work. Things to consider are timing of invoice issue and credit terms offered. For longer assignments it can be a good idea to agree a billing schedule with the customer where you agree key milestones of the assignment and issue invoices when these milestones have been achieved. However, it is important that both you and the customer agree that those milestones have been met.

Agreeing credit terms and billing schedules won’t guarantee that you will get paid on time.

In most cases the person processing and organising payment of your invoice won’t be the person with whom you are doing business. You may have spent time building and developing a relationship with that person – you also need to extend that relationship to your customer’s accounts department.

The accounts department may receive your invoice, it goes through all the internal processes, gets authorised for payment and ultimately gets paid. This will probably seem reasonable to your customer but may extend beyond your payment terms. So you’re wondering what the hold-up is and the customer wonders what all the fuss is about.

Sometimes people send the invoice to the person that they think will be clearing it for payment. There are 2 problems with this:

  1. The person who clears the invoice for payment may not be the person you think it is
  2. Your invoice may fall outside the normal processing systems and take longer to get in to it.

For example:

You complete work for your customer and the next day they call and tell you how pleased they are and what a great job you’ve done. The perfect time to issue an invoice. You send it to your contact, hoping he/she will authorise it straight away and get payment issued.

What actually happens is he/she receives the invoice and puts it to one side because they don’t deal with invoices and it’s not at the top of their priority list. Your invoice is now outside the system. At best it will sit there for another few days before making its way to the accounts department. But it could sit there for weeks before you call wondering when you’re going to get paid.

It is important to help your customers to pay you on time. You can do this by understanding how the customer’s payment process operates and working within that process. Find out:

  1. How often they issue payments
  2. What the cut-off date is for an invoice to be included in the payment run
  3. Who to address the invoice to
  4. What information the accounts department needs on the invoice; eg the customer’s reference or purchase order number
  5. What is the customer’s internal authorisation procedures and how long it typically takes.

Also provide copies of any relevant supporting documentation, such as copies of delivery dockets/service sheets signed by the customer and copies of quotations upon which the invoice is based. Also give as much detail on the invoice as possible about what the invoice is actually for.

What you should be aiming for is to have your invoice, with all essential information, on the right person’s desk, at the right time.

Invoice early and invoice often! The sooner your invoice is in the customer’s system the sooner you get paid. And trust me, nothing annoys an accounts department more than a non-conforming invoice, or someone trying to circumvent the system and jump the queue. Those invoices tend to get put to the bottom of the pile.

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