Keeping Your Business in the Black
You have finished your work, the client is happy, and youve just sent off the invoice now you can relax, right? Not quite yet! Just sending out your invoices isnt enough you need to remember that a sale isnt a sale until the moneys in your bank account! Emily Coltman ACA, Chief Accountant to online accounting service provider FreeAgent, gives her five top tips on how to collect payment from your customers and ensure that you stay in the black not the red. Dont make your customers think make payment simple! When it comes to invoicing, it pays to put yourself in your customers shoes. Think about all of the different ways your customers could pay you, and which would be the most straightforward for them. Also think about the risk involved with each payment method for example, a direct debit might be convenient, but if the customers balance is too low, it could be returned. One of the easiest ways to pay online is PayPal or Google Checkout both will let you take card payments without a merchant bank account. Using these services means that your customers dont have to give their credit card details to you directly, and you wont incur the fees and additional admin of a merchant bank account. However, its important to also do your sums and check PayPals fees and Googlestoo, because they charge you when you receive money in from your customers. Finally, make sure that your customers never have to dig around to find your payment details the easiest way is to include payment details, including your bank account number and sort code, on every invoice that you send. When to ask for payment You need to make sure you achieve an acceptable balance of risk between yourself and your customer in this area. Asking for full payment upfront is a fantastic low-risk option for you, but it could put prospects off, especially if they havent tried your product or service and dont know if theyll be happy with it. You should consider offering a money back guarantee to make them feel more comfortable. Alternatively, you could spread the risk by asking for part payment upfront and part on completion of the work, or delivery of the product. Asking for payment in full once a project is finished or the product is delivered puts a lot of the risk on to you. You could end up out of pocket if your customer delays payment, or even refuses to pay altogether, but youve already delivered the service or the product. Communicate your payment terms clearly Make sure your customers and prospects know when they should pay. Set your payment terms (i.e. 10 days, 30 days, etc.) and make sure theyre clearly visible on your website, and reinforce the message by including payment terms on your invoices, too. You may also want to consider adding a more personal approach onto your invoices to better communicate them to your customers. For example, we had one FreeAgent user who customised his invoices with a picture of his children and a note saying that they wouldnt get fed until the payment was received! While you might not want to go as far as this example, a personal touch can remind your customers that theres a real person behind your invoice, and that they should deal with that payment now instead of putting it off for another week. Dont be shy chase late payers A lot of small business owners make the mistake of not chasing money that theyre owed, because theyre worried about losing customers, or dont know how to remind customers without risk of offending them. Remember, youre providing a product or service that your customer wants and needs. Dont be embarrassed to chase them for the money. If youre worried that doing this yourself could damage your customer relationships, consider using a virtual PA service, or use online accounting software that will keep track of outstanding payments so youll never forget to send reminders to your customers.