Late payments can seriously harm a business. They hurt cash flow, slow growth, and add stress to daily operations. As a business owner, getting paid on time is essential for keeping everything running smoothly, including paying suppliers and covering everyday expenses.
But how can you ensure timely payments in today’s challenging business climate?
In the UK, this problem is worsening. Studies have shown that small businesses waited an average of 29.1 days to receive payments in 2024 – up 1.2 days from the last quarter.
So, what can you do to change this? How can you speed up payments and keep your business profitable?
This article shares seven proven strategies for helping businesses get paid faster. These tips will help you deal with common payment problems, improve your cash flow, and enhance your financial health.
Actionable Steps to Speed Up Payment Processing
Here are the seven actionable steps that will help you speed up payment processing:
- Set Clear Payment Terms from the Start
To avoid delays, start by setting clear payment terms. Let customers know when and how they should pay to prevent misconceptions later on. Clearly outline your payment expectations – this includes due dates, accepted payment methods, and any penalties for late payments.
Display your payment terms on quotes, invoices, and contracts. For example, specify if you expect payment within 30, 45, or 60 days, and mention preferred methods like bank transfer or credit card. The more transparent you are, the less likely clients will miss or postpone payments.
- Automate Invoicing to Save Time
Sending invoices on time is essential, but it’s easy to forget when you are in the rush of daily tasks. Smoother invoicing processes ensure that invoices are sent quickly and accurately. This reduces the chance of mistakes and allows you to set reminders for when payments are due.
Many accounting software programs like Xero offer automated invoicing features. These features help your schedule invoices to go out regularly, saving you time and reducing delays. Automated systems can also send reminders when payments are due, keeping you on your clients’ radar and encouraging them to pay faster.
- Implement Early Payment Incentives
A good way to speed up payments is to offer discounts for early payments. When you give a small discount to customers who pay their bills early, it benefits both sides. Customers save money, and you get paid quickly, which improves your cash flow and reduces the need to chase late invoices.
For example, you could offer a 2-5% discount if clients pay within 10 days instead of the usual 30-day period. This simple tactic encourages customers to pay earlier, easing the pressure on your business.
- Use Payment Methods that Speed Up Transactions
How you accept payments can impact how quickly the money gets into your account. Traditional methods like checks or bank drafts can take days or even weeks to process. In today’s fast-paced world, businesses need to use faster payment methods.
Digital wallets, bank transfers, and services like PayPal, Stripe, and TransferWise can majorly reduce processing times. Offering your clients the option to pay electronically speeds up the payment process, making it easier for them to pay and allowing you to receive funds promptly.
- Regularly Follow Up on Outstanding Invoices
Sending an invoice does not guarantee automatic payment. You need to follow up on unpaid invoices. Sometimes, customers forget to pay, or the transaction may get lost. Sending clear reminders shows you are serious about getting paid and encourages your client to respond.
Create a schedule for follow-ups. For example, send a gentle reminder one week after the invoice due date, then follow up again after 14 days. A final reminder can be sent 30 days past the due date, letting your client know there may be serious consequences for not paying. Consistent communication is key to ensuring your invoices are paid on time.
- Leverage Credit Management Services for Efficiency
If late payments are becoming a problem, businesses can explore professional credit management solutions. Services like Baker Ing help companies recover outstanding payments efficiently while maintaining strong client relationships. These services use professional methods to solve payment issues without harming relationships. This lets you focus on growing your business while they care for collections.
By hiring credit management experts, you can get payments back faster without dealing with stressful client conversations. This is helpful for managing important accounts or clients who often pay late.
- Implement a Strong Collection Process
It’s not just about sending reminders; it’s about having a clear plan for dealing with overdue accounts. You need an effective collection process outlining actions to take when a payment is late. This might mean using more formal communication, taking legal steps, or referring the account to a collections agency.
According to Upflow, small and medium-sized enterprises (SMEs) owed an average of £27,214 in late payments in 2024, and 73% indicated facing adverse effects due to postponed invoices. This clearly underscores the importance of executing an effective collection process.
Ensure your team knows the steps to follow when a client doesn’t pay on time. A clear collection process helps avoid misunderstandings and ensures consistent management of overdue payments. With a strong strategy in place, you can easily collect debts more effectively while maintaining a professional tone.
Conclusion
Getting paid immediately doesn’t have to be complicated. By using the strategies in this article, businesses can minimise payment delays, improve cash flow, and build better relationships with customers. Clear payment terms, automated billing, early payment rewards, and smart credit management are essential steps to keep your finances on track.
Don’t let slow payments hold your business back – take action today. By applying these strategies, you can get immediate payments, manage your cash better, and set your business up for long-term success.
Remember that a healthy cash flow is the foundation of every thriving enterprise – make it your priority.
