Invoices – they’re a part of everyday life for small business owners.
In our last blog post, “Demystifying your invoicing terms (Part 1 of 2)” we helped define some of the most common invoicing terms, that quite often confuse new business owners.
Now that you have this understanding under your belt, as Part 2 of the 2-blog series, we look at how to choose the best terms to include on your invoices so they generate the response you want – to get paid on time.
Analytics companies have done testing on masses of data over the years, figuring out which terms and strategies are most effective in getting invoices paid on time, for various industries. We want to share this knowledge with you.
Be aware that some methods work better for certain industries and companies than others, so after reading this blog post we hope you’ll feel better equipped to choose the ones that are best suited to your business and add them to your invoicing process.
Ways to get your invoices paid on time
The language and terms you use on invoices can and should vary from business to business, depending on the nature of the service or product that’s provided. Some companies might choose to deliver their product when they receive payment, while for others it might be possible to wait a month or longer to get payment.
“Net 30” is a term that is commonly used and it could be perfect for your service (perhaps your customer is waiting on delivery and needs to check the delivery before paying), but hey, if you’re in an industry where it makes sense to be paid sooner than 30 days, don’t set the wrong expectation by using Net 30.
Here are some points to consider when setting your terms...
If you want payment in 30 days, ask for payment in 13 days
On average clients pay invoices around 2 weeks late – you can use this knowledge to your advantage and cut back your payment deadline by 2 weeks (and be aware that your expectation of payment will be 2 weeks from when you specified on your invoice).
It’s not just what you say, it’s how you say it
It might seem cliché but using a little positivity and charm in your invoices really does help. Simply using ‘please’ and ‘thank you’ can get your money coming in faster. Also, just because you now know some of the invoicing terminology doesn’t mean your clients do too, so be clear. For example, instead of using Net 30, write ‘please pay within 30 days’ – saves any confusion.
Use specific timeframes
Using terms like ‘upon receipt’ don’t work. They’re too vague and people don’t respond. Give people a clear timeframe.
Charging interest doesn’t speed things up
Actually, research shows that charging interest on late payments actually causes payments to be later.
Make it easy to pay
In today’s digital world, offering an online payment option is a great way to get payments made on time.
Don’t take your customers by surprise
When you start up with a customer, let them know from the get-go what your payment terms are. This way everyone’s on the same page and there are no surprises or confusion later.
In this 2-part blog series on invoice payment terminology, we’ve defined the most important terms used on invoices.
Then, using data-backed insights, we’ve helped you to think about using the terms which are most effective in ensuring that you get paid on time, more regularly.
As business owners, refining invoicing terminology to be as effective as possible is a great way to encourage cashflow and achieve business success.