Late payments can have a serious impact on cashflow, especially
for a small or medium business. Accountant, author and small-business consultant Heather Smith shares 10 simple strategies to help you get paid on time.
1. Confirm prices and set up service agreements before starting work.
Don’t you hate it when you are in a restaurant and there are no prices on the menu? Make sure that your clients and customers are clear on what you will be charging them. Do not assume they know where to find your prices if they engage your services.
A service agreement is also a good idea, as you can set out your policy on cancellations, late payments and so on.
2. Include all your business details.
Invoices need to be tax compliant and present information in a clear and coherent manner. The business name, business address, telephone number, purchase order, invoice number and payment details (including your banking details, if possible) need to be present.
Tip: When you design your invoice, bear in mind that the recipient may need to scan and send it on to an accounts department for settlement. Make sure your font is easy to read and try to stick to colours that copy and scan well. Black on white is the ideal choice for critical information.
3. Avoid GST confusion.
If you are not registered for GST, do not have any reference to tax or GST on your invoices.
4. Choose the right payment terms.
If a 30-day payment term is affecting your cashflow, why not change your payment terms? You might choose to ask for payment on delivery of products / services, or choose seven or 14 days instead of 30 days.
5. Submit invoices quickly.
Issue accurate invoices as soon as possible, clearly outlining how you expect the invoice to be paid.
6. Encourage prompt payment.
If you feel that you have to offer industry-standard payment terms of 30 or 60 days but really need customers to pay sooner, can you offer a small discount for early settlement? You should also set out penalties for late payment in your service agreement.
7. Send it to the right person.
Before you submit an invoice, confirm the payment process: who receives invoices, and do they want a letter or is email preferred?
8. Check what details the company needs to pay your invoice.
Ask whether you need to include a specific reference or purchase number on the invoice. If you don’t have a purchase order, use the name of the company representative with whom you are dealing.
9. Set up a process of dealing with late invoices.
It is important to stay focused on collecting any outstanding invoices and have processes in place to chase invoices in a timely manner.
10. Don’t spend the GST.
Don’t mistake the GST collected for business money! Keep the GST due to the Australian Tax Office separate, so you are not tempted to use it and the money is available when it comes time to submit your business activity statement (BAS).
Useful tools and resources
- For detailed information on setting out an invoice, refer to the Australian Tax Office’s publication How to set out tax invoices and invoices (NAT 11675), which suggests a voluntary standard for setting out invoices.
- Expert source: Accountant, trainer and speaker Heather Smith is the author of Learn MYOB in 7 Days (rrp$29.95 Wiley Business) and Learn Small Business Startup in 7 Days (rrp$24.95, Wiley Business).
The views expressed in this article are those of the author and the interviewees, and not of Australia Post.
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