How to Get Paid Online: Best Practices for SMBs
One of the most stressful things for small businesses is managing cash flow because payments don’t come in on time or when they are expected. Even if business is going well and you’ve got plenty of customers to keep you busy, you can still run into issues with cash flow, so take a look at these tips to ensure you’re making it as easy as possible to get paid.
Use Invoicing Software
There are tons of invoicing software options to handle the task for you, such as PayPal, FreshBooks, and And.co.
These allow you to send invoices to your customers, set up subscription payments, and recurring invoices, too. This will make it much easier to track the number of invoices you’ve sent, when they were sent, when they are due, and when they’ve been paid. If you try to do everything manually, it will not only take extra time to create and send the invoices, but also to track them down and mark them paid, too.
Offer Multiple Ways to Pay
Accepting cash and checks isn’t always possible with online based businesses, but you still want to give multiple payment options. You can easily accept credit cards through a number of platforms like PayPal and Stripe, so people have their choice of how they want to pay. When you choose your debit or credit card processing solutions though, be aware of how the fees affect your business. Though you can write those fees off on your taxes as a business expense, it’s important to know that some processors will charge more than others, and it’s all based on your transaction volume.
Set Clear Payment Terms and Invoicing Expectations
Let people know in advance when they can expect an invoice from you – either when a project is finished, weekly, bi-weekly, the first of the month, middle of the month, or end of they month. When they know to be watching for it, it can make it easier to get paid faster.
That said, you also need to set the payment terms. While most of us would love to be paid right away, that isn’t always possible for your customer on the other end – especially if your customer is also a business. In that case, you’ll need to set terms such as NET 30, 60, or 90, depending on what can comfortably handle – assuming the payment also has the potential to be late. IF you set your payment terms out too far, you could easily run into cash flow issues.
To encourage your customers to pay on time, you can offer a discount for advance payment and charge a late fee on payments that reach a certain number of days past the due date. Rather than a flat fee for late payments, charging a percentage of the invoice ensures you’re charging everyone fairly, should they decide to pay you 30+ days after the invoice due date.
Create a Financial Plan to Monitor Cash Flow
It’s always a good idea to have a long-term financial plan so you can see what you should be aiming for in terms of how much to invoice for, so you know how many new and returning customers you need. You also need to know exactly what you’ve got coming into the business and what you’re spending money on in the business every month, so you can set and reach growth goals. This can also help you see if you need to make adjustments to your payment terms or look for cheaper services to ensure you have proper cash flow to pay your bills.
Send Reminders on Late Payments
As much as we’d like to hope that everyone will pay on time all the time, unfortunately, that’s not the case. Sometimes, it is just as simple as someone missing an email notification, or if your invoice got pushed to the bottom of their inbox.
After an invoice is late, there is nothing wrong with sending a polite, gentle reminder that the invoice payment is overdue. Simply re-send the invoice with a note to let them know that It hasn’t been paid and you’re sure it was just an oversight on their part.
Most of the time, this should solve the issue and get you paid. If you’re not getting a response from one person within a company, you can always send the reminder to someone else and let them know you haven’t heard from the other person yet and you want to be sure it made it to them.
If the reminders go unnoticed and your invoice goes severely past due, how you handle it depends on whether you want to retain the customer or can afford to let them go. If you want to keep the customer, being sympathetic or coming up with a payment arrangement can go a long way toward building loyalty to you. If you do not want to keep the customer, you can halt delivery or services as a result of the non-payment. Resend the invoice digitally and in the mail and call the customer directly.
When you automate as much of the invoicing and follow up process as you can, you have more time to focus on serving your clients the best way you possibly can, to keep them happy and coming back for more. Following these guidelines not only increases the chance you’ll get paid in a timely manner, but will ensure you’re spending minutes a week balancing your books, rather than hours chasing down the money people owe you.