The success of any business relies on two parties honouring the age-old principle of quid pro quo. You deliver goods and services and your clients pay you. Unfortunately, this isn’t always the case. Our experience has taught us that not all clients will pay on time – even when they’re contractually obliged to do so.

Steady revenue is the lifeblood of any small business and delayed payments can have a negative impact on how smoothly you operate. It’s not enough to simply trust that your clients will pay you on time. That’s why it’s essential to develop business strategies and accounting practices that encourage prompt payments.

Rae and Associates has been helping small businesses stay in the black for years. Follow our financial management tips and you’ll never have to stress about a delayed payment again.

1. Invoice early

Sending out your invoices promptly gives your clients enough time to pay you. It’s regarded as poor business etiquette to invoice for your services less than two weeks before you expect payment unless such an arrangement has been agreed upon by you and your client. Send your invoices immediately after you’ve delivered your product or service and follow up to confirm that the money has been received. It also helps to send cost estimates and quotations before you render your services so the client is always aware of the approximate cost before they will have to pay.

2. Offer retainers

A client will always owe you a fixed sum every month if you have a retainer in place. This makes it easier for them to plan what is owed to you and for you to factor it into your monthly budget. Today, many business-to-business contracts are retainers with fixed monthly payments and service-level agreements. Establishing retainers with all or most of your clients also allows you to have more accurate long-term cash flow projections and to make more informed decisions and improve financial management.

3. Require deposits

If retainers don’t work for your business model and you would rather bill your clients on a project basis, it’s critical for you to insist on a deposit before any work starts. Asking for a deposit is especially important for big projects and new clients you haven’t built a relationship with yet. You can use the deposit to contribute to your overhead expenses or for resources for the project in question – it’s up to you. Most businesses ask for a 30%-50% deposit, depending on the size of the total project cost.

4. Introduce payment options

It’s better to get paid late than never at all. Some of your clients might not be able to pay what you’ve invoiced for on time, but they are able to pay in due course. Introducing payment options gives your clients flexibility while guaranteeing that you get paid in full. Three- and six-month payment plans (with interest) are a good place to start. Be sure to be transparent about your payment options and all the terms and penalties included.

5. Automate your accounting

The chances of late payments are higher when you do your accounting manually. You might misplace an invoice, forget to include payment terms or ask for a deposit. Automated accounting optimises your financial management and is a time-saving way to ensure prompt payments.

QuickBooks helps you to stop chasing payments with online accounting. You get real-time alerts when your clients view your invoices and your clients get automated reminders in advance for payments that are due or a reminder for overdue invoices. QuickBooks also allows you to automate recurring invoices for your retainer clients so you don’t have to bill them manually each month.

Rae and Associates has a team of qualified QuickBooks experts ready to help you optimise your payments with smart and cost-effective accounting solutions. Get in touch with us today and we’ll make sure that your small business gets paid in full and on time every time.

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