Invoices are documents that tell a business who is to be paid and when they need to be paid. Invoices that businesses issue make sure that they are paid within the given time. However, if you feel that your company’s buyers don’t pay on time or you need payments to be completed sooner, here are a few ways you can do so. Let’s consider the problems associated with invoice payment and how your business can solve them.
Miscommunication and errors
Most invoices are prepared manually. Sometimes, due to a lack of time and care, there can be problems associated with the invoice. The vendor later has to face difficulties in the process. This increases the cost to process the invoice and involves a lot of time, and can cause delays. There can also be a lot of errors in the invoice when prepared manually.
There is an easy solution to all this. In the case that errors are occurring because of your manual process, you can digitize the entire system. This can be a bit challenging with existing companies, so another way can be to clear out the terms and conditions so that your clients can understand them easily. Digitization won’t just help with clarifying the invoice and speeding up the process but will also save you a lot of time and money. It’s like killing two birds with one stone.
The time taken to create the invoice
The sooner you prepare the invoice, the sooner you are likely to get the payment. Even after an invoice is created, there is a huge margin of errors that can occur in the creation of the invoice. This time taken to rectify all the errors is called the reviewing period and you need to cut down on it to create a better invoice. The question is, how can you cut down on the reviewing time of your company?
The first solution is digitization. Digitization ensures that invoice errors are minimal and need little or no reviewing period. This ensures you can invoice immediately and get paid quicker. The second way is to make simple invoices. The simpler the invoices, the fewer errors, and the review period will be faster.
The mode of payment
Not every buyer you have will be able to pay you the way you tell them to without taking some time. If you want to eliminate this constraint of not being able to pay via their preferred mode of payment, the solution is simple. You can accept all modes of payment, whether it is through cash, DD, cheque, or online bank transfer. This will increase the number of ways through which you can receive your payment (which can be a hassle to check) and also increase the number of customers you will retain.
You can also allow automatic payments, this means that you will specify the date and time by which you require the buyer to pay you, and they can do so without even lifting a finger. Their software can easily make the payment without them even remembering that they have an invoice to be paid out. This is a blessing for all buyers who have automated their AP workflow process.
Lack of incentives
One big reason why you might not be getting paid earlier than you should be the lack of incentives. You might be thinking to yourself, why should you provide incentives to get paid? The reason is simple, your clients will feel more motivated if they see that there is a slight discount (just 1 or 2%) if they pay the invoice before a certain number of days. This is called dynamic discounting and it is the best incentive you can give to your buyers.
You can also go in the other direction and impose a late fee if the invoice is paid late. You might already have such an imposition, but you can also increase the late fees to ensure that your clients pay on time. You also need to follow up on late fees, though. There can be some trouble on the client’s side which you might need to clarify so that they can make the payment. It is the money you need to receive, so you might need to work a bit for it.
In conclusion, if you want your money to be paid on time, there are a lot of steps you can take. You need to take action and choose whether you want to get paid early or let things rest easy as they are, but if you are reading this article, you probably want the former. Hopefully, you gained something from this article to apply to your company.