First, make sure your invoice is clear. What do I mean by that? Not all invoices are created equal. Make sure your company name is clear and easy to read. Yes, your logo is awesome, but maybe the really cool font that the marketing department uses isn’t the best for the AP department. Make sure your Invoice number, Invoice date, and due date are clear and in the upper right hand corner. Don’t make your customer guess what the due date is. Yes, it says Net 30, and they should be able to figure it out. Sorry, no they can’t. Lets also be very specific and clear about what you sold them. It is obvious to you what you sold them, but you do this every day. Try and make it so a 5th grader would know what you are talking about. Also make sure the “Attention” person is on the Invoice. I am sure that your customer must get the Invoice approved. In a large company, who would do that? Well, the person who ordered it from you. If there is no one, then the Invoice gets lost in a black hole. And last, make it easy to pay. Nowadays, there are best practices about customer portal, paying on line, and of course the old tried and true “make check Payable to.” So put that on there. Even add your remit to address. Don’t let anything be a guess from the customer. The clearer your communications are on the face of the invoice, the faster you will receive your money!
Second, it is your money so it is ok to try and collect it. Don’t feel bad about the collection process. But it must be done. Cash Is KING. Get comfortable with making the collection call. If you have done a good job, delivered what you said, added value, made your clients life easier, then you should get paid. But don’t take it personal. It’s just business. Go about it in a business-like manner.
Third, send out statements on a regular basis. Statements are a great line of early communication. Establish a regular pattern. Maybe the 15th of every month. But do it regularly. Every month, on time, no exceptions. Even if an invoice is only a couple of days old still send that customer a statement. It serves multiple roles. It is a great way to just say, hey, don’t forget you have some invoices due. It allows your customers’ AP department to reconcile their side to see if there are any discrepancies. And it allows the customer to say, hey, I need a copy of this invoice can you send me one? Make sure your statements follow the same guidelines as the invoice (make it easy to pay and etc).
Fourth, consider giving early payment discounts or late payment penalties since you have already established a clear payment deadline. Of course, make sure this information is in your contracts clearly spelled out. For example, if your terms are Net Due 30 days, you could offer a customer a 5% discount for paying within 14 days. For the late payment clause, you can consider a late fee or percentage after 45 days. But be careful here, don’t go overboard. Nobody likes paying a penalty. If you charge for these, again, make sure you are communicating with the customer when they receive a late payment penalty. Don’t let this process just be a part of your internal accounting, the customer MUST receive an invoice with the charges, and it needs an Invoice number. All rules above still apply.
Fifth, Automate, Automate, Automate. Customize your form once to make sure all required information is there. Have your system email out the invoices. Does anyone really send paper invoices anymore? Have some sort of automation send out your statements. Then have more automation that sends out notices of past due individual invoices. Sort of set it and forget it. For example, 4 days before the invoice is due for its 5% discount, you could send an email reminding them of the discount and discount deadline. Or 2 weeks before the invoice is set for late payment penalties, you could send a polite reminder email that the invoice is now 2 weeks past due, and that penalties will incur in 15 more days. Make sure that it is clear on these communications how to pay their invoice, where to pay, who to send it to, and how to send it. Don’t leave anything to chance. Don’t make the customer go looking for information or assume anything.
Sixth, create a Customer Portal where your customers can access their information including invoices, contracts, statements, and support cases. Your portal should be a self-service tool that helps you communicate to your customer. Make it easy to get a copy of any open invoices themselves or make payments.
In all these communications, in the words of Roadhouse character Dalton (played by Patrick Swayze) “Be Nice.”