If you do the work, you deserve to get paid. Check out our top four tips for small businesses.

Written by Jody McDonald

Overdue payments pose a serious cash flow problem for businesses. A recent study found Australian small to medium businesses are losing up to $7 billion a year because companies fail to pay on time.

The Australian Government is looking into ways to discourage tardy payments, including a new requirement for Commonwealth agencies to meet 20-day payment terms for invoices less than $1 million.

Managing invoicing more effectively can help you get paid faster. Here’s how:

1. Lay the foundations

Make sure you’re starting from a solid foundation:
 
  • establish a business bank account
  • determine what payment methods you’ll accept – e.g. cash, bank transfer, credit card or PayPal
  • consider how you’ll record sales and agreements to deliver services – do you need a contract?
  • set up a standard invoice template with the details you need to include.

2. Decide on your terms (and stick to them)

Set terms that help you stay on top of your finances. For instance, you might:
 
  • expect people to pay the total amount before a product or service is received
  • request payment after the delivery of goods and/or services
  • give people a net number of days to pay – e.g. seven, 15 or 30 days
  • require a 50% deposit for invoices of a certain value, or part-payments
  • apply a penalty for late payment or a discount for on-time or early payment.
Communicate your terms up-front to customers, so there’s no surprises and you can stand firm.

3. Create, send and follow-up invoices

This step is simple but requires effort: set aside time to invoice regularly and expect on-time payment. Send reminders and follow-up as soon as an invoice is overdue.

4. Consider investing in software

Software can make invoicing faster and easier. Check out tools like Wave, Rounded and FreshBooks for small businesses. For invoicing plus more in-depth financial management and payroll consider tools like Quickbooks, Xero and MYOB

Software can help you:
 
  • track the time you spend on different tasks and projects
  • easily create invoices with the correct details and send them electronically
  • apply GST and keep more accurate records for tax time reporting
  • track expenses so you can recoup costs or budget better
  • automate recurring invoices, send reminders, and apply penalties for late payment.

Make sure the software you choose allows for the payment options you need. Take advantage of free trial periods to test different solutions.

Get control of your cash flow by managing the paperwork and policies around payment and invoicing in your small business today.