How Smarter Invoicing Gets You Paid Faster

To anyone in the custom electronics business, the trend of slow-paying customers is all too familiar. What may surprise you, however, is that the solution isn't necessarily just on the customer's side.

Many small business owners fall into the trap of believing that change can only come from the customer. A more productive perspective is to look at what you can do on your end to speed up payments.

The payment cycle starts with invoicing, and that's where you're in control of the process. Learn what you can do to prompt quicker payment with these tips for smarter invoicing.

Know who you're dealing with - The best way to avoid chronic slow payers is to know who you're dealing with from the start. When establishing a relationship with customers, research their credit and payment histories so you're aware of any past payment issues. Also conduct a credit check with a credit reporting agency, such as Dun & Bradstreet or Experian, before accepting a large order.

Give them what they need - Avoid delays due to accounting technicalities by asking new customers what they require on invoices. Do they require a purchase order number, or will your invoice number suffice? Is a detailed breakdown needed, or will a general description of services or goods do? Perhaps they require your Employer Identification Number (EIN) on the invoice.

Asking the right questions up front is free, but failing to do so can really cost you in the long run.

Faster invoicing, faster payment - Customers can't pay an invoice they haven't received. Send invoices the day a project is completed or as soon as goods are shipped. A delay of only a day or two can mean missing the customer's payment cycle, which may leave you waiting until the next payment cycle.

To speed both invoice delivery and payment, consider invoicing and receiving payments electronically with online solutions. If you opt for an electronic invoicing and payment solution, look for one that offers customers multiple online payment options and is compatible with any invoicing software you currently use.

State your terms - There are few phrases in business that have less impact than "due upon receipt." Abandon these hollow words and send invoices with a due date. Customers who pay in 30 or 45 days will follow their own schedule, but you will have at least stated your terms in writing.

Build a document trail - Document all communications with customers regarding invoices for future reference and record all requested changes in writing. If you need to follow up on late payments, these records will serve well.

Also be sure to have a system to track overdue invoices so you can follow up immediately. When sending payments, record the transaction. Likewise, when payments arrive, record the date and the amount of payment. Consider adopting specialized software or an online solution for this task, or speak to your accountant or financial advisor for suggestions.

Make collection calls - When an invoice becomes overdue, promptly follow up with a call. Take a matter-of-fact approach and assume good intentions on the part of your customers, recognizing that there may simply be a misunderstanding. Before ending the call, make sure you agree on a payment date and a specific amount.

Now that you're armed with some solid strategies for speeding payment, put them into practice with a consistent routine. Whether you or someone else on your staff deals with invoicing, make sure that you stick to a plan. Because good intentions won't help to prompt quicker payments - but a diligent routine of smart invoicing practices will.