Ways to ensure you get paid on timeReading Time: 2 minutes
Maintaining positive cash flow can be challenging for small businesses, whether you’re just starting out or have been running your company for years.
if reliable clients also fall behind one month, the result can be devastating.
The following tips will help you get paid faster, so you can avoid a dangerous COVID -19 cash flow crunch.
Invoice quickly and accurately
When a contract wraps up or a sale is concluded ,send your invoices straight away. Before you send an invoice, be sure it’s addressed to the right contact. It also helps to itemize costs in detail so no questions arise that delay payment processing. Ensure all all numbers are accurate and properly calculated.
Set a deadline
Make it clear on every invoice when payment is due — for instance, “Payment due on receipt” or “Payment due within 30 days”. Ideally you’ll have outlined your payment terms in writing, including any penalties for late or non-payment, when you start working with a client. Summarize your terms on each invoice as a reminder.
Set payment policies
You might choose to reward customers who pay early with a small discount or reward as an incentive. Consider a 5% reduction on invoices paid within a week.
If a client doesn’t acknowledge receipt of your invoice, check in to make sure it was received. Inquire about the status of your cheque as soon as a deadline is missed, then resend the invoice with a friendly reminder.
Be willing to negotiate
Sometimes a client intends to pay but needs a bit of time to come up with the cash. Be open to negotiating a payment plan; it is better to receive payments in small increments than not at all.
Always include the VAT element in your invoices especially if the kind of goods you sell or services you render are Vatable. The VAT rate in Nigeria is 7.5%. If you fail to do so, the FIRS will recover the VAT from your business during tax audit. It will be assumed you’ve pocketed the VAT element/amount. Ensure you remit VAT collected before the 21st of every month. That’s if your business is above the N25million threshold.
Finally, although no small business owner wants to resort to legal action, if you’ve tried repeatedly to contact a customer you may have no other option except to claim the loss as a business deduction.
One of the best ways to encourage customers to pay on time is to maintain a friendly relationship. Encourage goodwill by adding a handwritten note to your invoices, remember your customers’ birthdays, and be sure to thank them from time to time for their ongoing business.
It’s a simple fact: when your customers/clients feel a connection to the person behind the business that serves them, they’ll be more inclined to take care of their invoices quickly.
~ Adeniyi Bamgboye (ACA, MBA, ACTI, ACCA)