Late payment has, for many years, been a major problem affecting both the cash flow and viability of particularly smaller businesses, It’s one of the perils that few people seem to warn you about before you make the leap into the world of the self-employed.
Particularly for very small businesses, waiting for payment from customers can affect payments to your staff, your suppliers, and even to yourself. Invoicing clients via your online bookkeeping program (we recommend Xero – very user-friendly) has the potential to help you get money in much faster. Plus, at the end of this article, we share with you a surprising finding that might just halve the time you have to wait to be paid.
Send your invoice straight away
As soon as you have an order, prepare the invoice straight away – even before you’ve fulfilled the order. That way, you’ll know it’s done and that all you have to do now is to complete the work, log back into Xero, and send it off by email to the client.
Don’t wait until the end of the month to do invoices all at once because remembering exactly what you did four weeks ago and for whom can lead to occasions where you forget to send an invoice at all.
When you do your invoices on Xero, you won’t have paperwork cluttering your desk. Your invoices will be sent by email and you’ll be able to log in at any time to see the invoices that are soon to become due and those which have become overdue.
Log in to your bank account every day and connect it to Xero
Thanks to the new Open Banking standards allowing apps and programs access to your online bank account, Xero can now match incoming payments to invoices issued. Day by day, you’ll know exactly what your business has out there – the sum of all the invoices combined which are yet to be paid.
You can set up Xero to send automatic invoice reminders before the due date, on the due date, and after the due date – click here for instructions. If a customer feigns ignorance and wants to know how an overdue invoice fits in with other invoices you’ve issued them, you can email them all of their statements all in one go.
Every time you issue an invoice and every time your customer makes a payment, Xero records it so you keep on top of your bookkeeping.
Get paid in half the time with Xero and Stripe
You can integrate Stripe, the online credit and debit card acceptance facility, with your Xero account. You’ll now be able to offer your customers the ability to pay by card straight away. Stripe takes a small cut (around 3%) and it normally takes 7 days for the payment to clear.
When the payment hits your bank account, Xero will know who the payment was from and mark the relevant invoice as paid in your books.
In a four country study carried out earlier this year, sending out an invoice asking for cheque payment or bank transfer will result in an average wait for payment of 38 days. However, if you offer clients the opportunity to pay by credit card or debit card, the average time before you see the money is just 19 days.
Invoice masterclass with TWP
For the latest advice on invoicing and getting paid faster, please contact your TWP accounting partner on 01932 704 700 or at email@example.com.