How to Get Paid Faster and Avoid Cash Flow Woes

The Root of the Problem: Slow Payments

The lag between completing a job and getting the dough can be a killer. You've got expenses that won't wait – wages, rent, suppliers – they all need paying. The problem is, if the cash isn’t flowing in, it can't flow out, and that's how businesses get into trouble.

Inefficient Invoicing

It all starts with invoicing. Are you still manually creating invoices? That's time-consuming and can lead to delays. The solution? Automation. There are stacks of software options out there that can zap out an invoice the minute a job's done. Plus, they can send automatic reminders to clients, so you're not chasing payments.

Make sure you're using a platform that lets you know once the invoice is delivered, and read. This way, there's no dispute about whether the invoice was received.

Bonus points if the system you're using can send invoices links via SMS, emails can get lost but it's very rare for someone to miss a text message.

Ambiguous Payment Terms

Unclear payment terms are a recipe for a headache. Be crystal clear about when you expect to be paid. Set your terms and stick to them. 30 days? 14 days? Whatever it is, make it known upfront. Don't be shy about adding a late fee for overdue payments, either. Sometimes that's all the nudge a client needs. Conversely, consider a discount for early birds who pay before the due date. Everyone loves a saving, and it might just get that cash in quicker.

Hot tip, if your costs are fixed for the job then send the invoice before it's even completed, ~10% of people will pay it as soon as they receive it. which can dramatically help with cash flow.

Understanding Customer Processes

Some clients are slower to pay because their own processes are as slow as a wet week. If you're dealing with bigger businesses, get to grips with their payment cycles. They might only pay invoices at the end of the month, so timing your invoices right can make a difference. And consider doing credit checks on new clients. It's better to dodge a bullet than to shoot yourself in the foot with a client who can't pay up when it's time.

Chasing Payments

No one starts a business to chase unpaid invoices, but it's got to be done. Use a system that flags when an invoice is nearing its due date. Shoot out a friendly reminder. If that goes ignored, have a process in place for following up. It could be a phone call or a more formal notice. If it's a regular problem, you might even consider outsourcing this headache to a debt collection agency. It's not as rough as it sounds – there are plenty of companies that handle this with a deft touch.

Hot tip, create an email address to make it look like reminders are coming from internal accounts staff, bookkeeper or your accountant. We all want to maintain a healthy relationship with our clients.

Making it Easy for Customers

Your clients are more likely to pay promptly if it's easy for them. So, give them options. BPay, direct deposit, credit card, PayPal – the more, the merrier. It's about removing barriers. And keep those relationships sweet; a client who feels valued is more likely to make you a priority when it's time to reconcile their accounts.

External Factors

Sometimes the problem is out of your hands. Market conditions or issues specific to your clients can delay payment. Stay in the loop with what's happening in your industry and be proactive in your communication. If a client is struggling, work with them. Maybe a payment plan can keep the cash flowing, even if it's not the full amount right away.

The Fruits of Your Labour: Solutions in Action

Implementing these changes isn't just about preventing the worst. It's about building a business that's robust and resilient. Here's how to put these solutions into action.

Embrace Technology

This can't be stressed enough. Use software that integrates invoicing, payment tracking, and reminders. The investment will pay for itself in time saved and cash received. There's plenty of options tailored to Aussie businesses, so find one that fits like a glove.

Be Clear and Fair

Spell out your payment terms clearly on every invoice and on your website. And be fair. If you're going to charge a late fee, make sure your client knows this from the start. No one likes a nasty surprise.

Get Personal

Don't just be a name on an invoice; build a rapport with your clients. They should know who you are, and you should know them. It’s harder to ignore a payment reminder when there’s a solid relationship backing it.

Follow Up Like a Pro

Set reminders for yourself to follow up on invoices. Be professional, be polite, but be persistent. The squeaky wheel gets the grease, as they say.

Offer Incentives

Consider what incentives you can offer for prompt payment. A small discount for paying early can work wonders. And it's not just about penalties for lateness; it's about rewarding good behaviour.

Plan for the Worst

Finally, be prepared. Have a buffer in your bank account for lean times, and don't put all your eggs in one basket – diversify your client base so if one goes under, they don't take you with them.

In summary, the key to avoiding cash flow dramas is to be proactive. Set up systems that encourage quick payment, use technology to streamline your processes, and build relationships that make your invoices a priority. It's about being smarter with how you bill, how you follow up, and how you manage client relationships. Do this, and you'll not just avoid going under; you'll thrive. Because when cash flows smoothly, everything else does too.

Now, get out there and make those changes. Your business will thank you for it!