Finance: Ensure your clients pay up

For many self-employed people, one of the biggest things they struggle with is being paid.

Do you find it hard to get people to pay your invoices on time, leaving you to take out overdrafts and other loans to cover your expenses?

Being profitable isn't the problem - having cash to pay the bills as they fall due usually is.

Working out how long it can take to be paid is a surprising exercise. When you factor in that you will often have to pay staff to do the work you're billing for, it can be a long time before you see your initial dollar back with any profit attached to it (providing it hasn't been whittled away by overdraft interest).

Accounting software firm Xero did a bit of research on this and analysed more than 12 million invoices, to work out how long it takes people to pay up.

It found that no matter what terms you put on your invoice, whether you ask for an immediate payment or allow 30 days from the time the invoice is sent, people were, on average, a fortnight late with their payments.

The research found that if you want to see payment in 30 days, you need to set your payment terms at 13 days or less.

Xero offered some tips on how to be paid faster, including discussing your payment terms with your customer before you do any work, keeping detailed records, setting appropriate payment terms and addressing the invoice to the person who will actually be paying the bill.

Xero also recommends invoicing as soon as the job is done and having a system of reminders.

Let's take this a step further - why not get a prepayment? You could do this by offering guarantees with your service or product.

Making sure that you have the correct facilities such as credit card facilities, internet banking and Eftpos also helps.

Third-party finance options could be found for your product and services (think monthly insurance payments).

Even accounting fees these days can be financed. Discounts for prompt payment are also a popular carrot approach.

Think about what else you could do to encourage a quicker payment. Often, making a personal connection and leaving the customer with a positive experience will help you get paid promptly.

At the end of the day, do remember to say thanks when you do get a payment - it'll ensure your customers are thinking of you favourably the next time a bill rolls around.