Businesses of all sizes and across all sectors have at some point experienced late payment from clients. Periods of economic uncertainty, such as Brexit and its recently extended deadline, can further impact the length of time it takes for some companies to settle invoices.
For recruitment agencies, receiving prompt payment and maintaining a steady cashflow are crucial to their success. Delayed payments from clients can ultimately lead to delayed payments to contractors/ placements, which results in loss of confidence and loss of business.
For start-up and small to medium sized agencies, a diminished cashflow prevents investment in growing the business, with efforts and energy focused on cost-cutting and credit control instead of forward planning for expansion.
Here are ten simple tips to getting your invoices paid more quickly:
- Agree payment terms in advance.
Most businesses have their own payment terms, and it’s important that you know what those terms are before you start the work. If you expect a 30-day payment term, yet your client stipulates 60 or 90 days, there will be a period of negotiation or you will need to put processes in place to allow for the longer payment period. Perhaps consider invoicing more frequently and in phases, so you are not owed larger sums for longer periods.
- Make your payment terms clear on your invoices.
Ensure your invoice includes the exact date that payment is required rather than a more generic ’30 days’, for example. And always include the methods of payment on the invoice. If you are working with international clients, be sure to include the relevant information for payments from abroad. Avoid cheques!
- Itemise your invoices clearly.
Don’t give a business any reason to query your invoice, by clearly itemising what they are being charged for, and checking all the details are correct. Frustratingly, a request to revise and reissue an invoice can often happen close to, or on the date the invoice is due, delaying payment unnecessarily. Also check if your client has quoted a Purchase Order number. If they have, make sure it’s clearly referenced on your invoice.
- Send invoices electronically.
It’s important that the invoice reaches the right person, in the correct format, at the right time. A posted invoice can easily be misplaced, while an invoice sent by email can be traced, cc’d and part of an accountable thread. If your client uses an online invoice platform, make sure you are registered as a supplier and able to submit invoices that meet their requirements. Working with a finance partner can streamline the invoicing process.. see tip number 10!
- Send invoices promptly.
Avoid holding back your invoices because of workload, or until you reach a specific day or date. Send invoices as soon as possible. Not only should it (hopefully) result in faster payment, it can also mean that the project or placement is still fresh in your client’s mind.
- Consider a small discount for early settlement, or charges if late.
If you are receiving late payments from one or more clients on a regular basis, consider offering a small discount for early settlement. A 5% discount for payment within 15 days instead of 30 could encourage some business owners to be more prompt. This should only be considered if you can afford the difference in margin. Equally, you could consider introducing fees for late payment. If doing so, the charge must be clearly outlined in your invoice terms and conditions and communicated before you start the work with a client. You want to avoid any unpleasant surprises for your clients.
- Send a reminder or make a courtesy call.
Don’t wait until the invoice is due or overdue to send a reminder. It is perfectly reasonable to send an email one week prior, to politely enquire that the invoice is on track for payment on the specified date. You can attach the original invoice for their reference. Keep the email brief, polite and with a clear subject. If the client is new, or you have experienced late payments from them previously, you can make a quick courtesy call to check that they are in receipt of the invoice and they have everything they need to make a payment on time. At this point, it is useful to have the name of your contact or the relevant person in their accounts team to speak to directly.
- Start chasing immediately.
If payment still hasn’t been received on the due date, chase immediately. A brief email with the invoice attached can be followed by a phone call to enquire if payment is being processed.
- Always be polite.
It goes without saying, but you want to maintain a good working relationship with your client, right? Be professional, be polite, but be firm where required. It is reasonable to ask for an expected payment date if your invoice is now overdue.
- Consider working with a finance provider.
AT 1PS we provide fast, flexible funding, and a secure online portal to manage contracts, invoices and timesheets. Our invoice finance is designed to alleviate cashflow problems by making regular prompt payments to our clients. Our fully serviced back office service reduces admin, so small and medium sized recruitment agencies have the freedom and resource to grow and scale.
Read our Guide to Invoice Finance for Recruitment Agencies, and find out more about the benefits of working with 1PS.