What's the environment like at the moment for small businesses in terms of getting their invoices paid?
A recent survey from the Auckland Chamber of Commerce found a number of Auckland businesses were concerned at the slow pace at which people are paying their bills.
With that said, the availability of online invoicing tools can help to shorten the time between when work is done and when payment is made, as well as making it easier for small businesses to stay on top of debtors. Our data shows that by using online invoicing, Xero users are getting paid 25% faster today than they were in 2011.
What are some of the biggest obstacles for small businesses when it comes to getting paid on time?
There is a combination of internal and external factors that prevent small businesses from being paid on time.
Between just trying to run and build their business and managing their personal commitments, finding the time to get invoices out and then following up on overdue invoices can be a real challenge for many small business owners. Plus, trying to work out what work has been done and what needs to be invoiced can be difficult, especially if there are a few people working on each account.
There is also the issue that no matter what you do or how hard you try, some debtors will not pay you on time. They could be having their own cashflow problems, or they've missed your invoice.
What are some of the things that small businesses can do to help them get paid faster?
One of the most important things you can do is sort out payment terms up front. This sets expectations around payment before you start the work, and avoids any confusion. While you're at it, it's important to set payment terms that are appropriate for your business. Keep in mind that on average, regardless of the due date you give them, debtors only pay invoices two weeks after the date set. So if you need to get paid within 30 days for example, you may want to consider setting your terms at 13 days to be safe.
Time is obviously at a premium when it comes to managing a small business, but it's also important to remember this is often the case for your clients too. Making sure your invoices are clearly laid out and addressed to the person who's actually paying the bills are two things you can do to avoid any confusion, and minimise any lag in payments. Sending your invoice as soon as possible is also important here, giving your clients and customers adequate time to process them at their end.
Inevitably, no matter how on to it you are in setting clear payment terms and creating awesome invoices, overdue invoices are a reality for every business. It can be time consuming, but getting paid faster means keeping track, and staying on top of debtors. Reminder emails can often do the trick when it comes to an overdue invoice, but a phone call is a surefire way to get things moving; the Money Coming In widget on the Xero dashboard can help here in prioritising overdue payments and flagging them for action automatically.
The reality is that many small business owners feel uncomfortable having to ask for money; it can feel awkward, even when you've provided an excellent service. When it comes to chasing overdue invoices, handing the task to another person in your team - if you have them - who sits outside the day-to-day relationship with the customer can often help get around this, and help you get paid faster.
Coming up in Small Business: Crowdfunding campaigns are an increasingly popular way for companies to raise funds for projects. What has worked, and what hasn't, for companies that have run these campaigns? If you've got a story to share, get in touch: email@example.com