An invoice can be the last point of communication between a business and its clients. This is why it’s essential that you leave a good impression. Many businesses have suffered because they’ve had to deal with later payments thanks to bad invoice payment terms. This article will show you how you can get paid quicker, so you won’t need to worry about being paid late.
Below you will find 10 tips that will show you how to write effective invoice payment terms:
1. Use The Correct Wording
It’s essential that your invoice is professional and polite. A friendly phrase such as “Please make your payment within 48 hours of receipt” for example, is much more professional than “Please pay now!”. If you’re polite on your invoice your company is more likely to get paid on time.
2. Itemise the Layout
It’s good practice to ensure that your invoice is as descriptive as possible. It should ideally include:
- The date of the goods received
- A description of the goods delivered
- The price per unit
- The total price
- Any tax
Adding all of these details ensures that the customer or client knows exactly what they are paying for. This means the invoice is more likely to be paid on time. You may also want to mention a purchase order number as this will further help the client or customer to understand what they’re paying for.
Don’t forget to address the invoice to a specific department (Accounts or billing, for example) or person as failure to do so could result in a delayed payment.
3. Be Clear About the Deadline
Some invoices stated that the invoice payment is “Due on receipt”, others include a number of days as this gives the customer an understandable deadline. You may, therefore, wish to include a deadline of 14 days, 28 days, or 30 days, whichever is better for you. Being clear about the deadline for payment is more likely to result in you getting paid sooner rather than later.
4. Mention Late Fees
In your invoice, you may want to mention a late payment fee. This adds a bit of urgency to the invoice and helps to ensure the invoice is paid on time. You may even find that the customer pays you faster than they would have done before the addition of a later payment fee.
5. Use Short Pay Terms
You may be prepared to wait a long time to be paid by some customers, but you may not wish to wait so long with others. Negotiate a shorter payment term such as 14 or 30 days, for example. This can help you to establish a relationship with the client. What’s more, is a shorter term will allow for faster cash flow.
6. Send and Receive Invoices Quicker
In the past, invoices were sent by mail but these days they can be sent in an instant. You can upload and submit an invoice online in a matter of minutes. Invoicing software can ensure it takes just minutes to send an invoice and for your customers to receive them. You may also want to think about sending invoices via email as it’s a free, and easy-to-track option.
7. Offer Early Payment Discounts
Everyone loves to get a discount and your customers will love a discount too. Offer your customers a discount for making an early payment. This can ensure that they pay you faster while they feel like they’ve got a bit of a bargain. You don’t have to offer a huge discount; a 5% discount may be enough of an incentive.
8. Allow Multiple Payment Options
Gone are the days when you would receive payment by cheque, now you can pay via electronic funds transfer, or using a debit or credit card. These are relatively quick and safe ways to pay suppliers. Mention all of your payment options in your invoices so customers have more flexibility. You may even be prepared to receive payment via PayPal, a very safe method that ensures the money clears almost instantly.
9. Generate Invoices Quickly
If you want to be paid quickly you will need to generate your invoice quickly. Ideally, you should generate it as soon as the customer has received the order. Mention when you’re going to request payment (The billing date) so they know a payment is due soon. Try to opt for a due date that’s close to the client’s payment date is a great way to ensure you get paid quickly.
10. Be Strict with your Payment Terms
What are invoice payment terms? They are the terms that you have agreed with your customers. While you may be prepared to let a customer pay an invoice a little late just once or twice it’s no good practice to do this continually. This is because the customer will assume that it’s ok to pay late. Make your customers understand that all payment terms are fixed unless you formally agree to allow them to pay a little later. If payments are made later than you asked you may have to penalise the customer. You could even suspend the fulfilment of new orders until they are up to date with their payment.