There is possibly no better feeling than putting the finishing touches on a project and hitting ‘send.’ Except, perhaps, getting paid for your hard work.
Unfortunately, the glorious feeling of a wallet getting fatter can be rare for some business owners, freelancers, or contractors. Getting paid can be a difficult and arduous process, which can damage your cash flow and threaten your SMB (small to medium sized business).
Days Sales Outstanding, or DSO, is an accounting term that is helpful for analyzing the effect of late payments on your business’s cash flow and overall performance. DSO is simply the average length of time from when you send your invoice to when the money actually lands in your account. A high DSO means you aren’t collecting payments in an efficient manner, and your business could be at risk.
Here are a few ways to lower your DSO and get that payment faster.
First of all, if you’re using paper or physical invoices, it’s time to switch to digital. Electronic invoices are faster, easier to track, easily customized, and best of all, able to integrate with other business functions like time tracking, and bookkeeping.
Not sure where to start? There are several invoice generators out there for the budget-conscious small business owner.
For example, using Veem’s invoice generator, users can create professional invoices. Then, you can customize your invoice with your business logo, contact information, detailed itemized list of tasks, and payment terms before sending. And, thanks to Veem’s end-to-end payment tracker, you’ll always know exactly where your invoice is, and when your payment will arrive. Veem integrates with your favorite bookkeeping and productivity software, allowing you to streamline your workflow and say goodbye to double data entry forever.
Simply put, migrating both your invoices and payments online will save you and your clients time, money, and effort.
Have you ever been about to purchase something online, only to be confronted with seemingly endless fields to fill in and boxes to check? After the second or third confirmation page, you probably decided Fido didn’t need that designer dog bed after all.
The same principles apply to paying businesses. If your customers can’t pay you easily and quickly, they’re more likely to get confused, give up, or simply forget.
In terms of payments, the sender has all the power. While they determine the timelines for your work or supplies, they also decide when to send your money.
So, the simpler it is for your customers to pay you, the more likely they are to pay you on time. A good strategy is to expand your payment options. Think beyond cash or wire transfers, try a new type of payment.
Veem provides every user with a unique Pay Link, a branded URL to share with customers that enables them to pay a business with a single click. Simply share your customized Pay Link with clients via email, social media, or your website. Then, customers can securely send payments directly to the correct account. This way, no one needs to share their sensitive banking information with anyone else, and everyone enters their details themselves. That means less mistakes, and faster payments.
Don’t forget to streamline your end of the process, too. Waiting for checks to clear and wire transfers to arrive can eat away your valuable time. Choose a simple payment option that allows you to get paid directly into your business accounts. For example, Veem’s Deposit to Debit feature allows payments to be deposited directly into the receiver’s debit account, further streamlining the accounts receivable process.
Let’s face it – we all like to be rewarded for doing good things. So why not reward your clients for paying on time, or even early? Include an early payment discount, or offer a discount on future services when customers pay up front. This can help stabilize your SMB’s cash flow and increase the lifetime value of a client.
Conversely, you can encourage timely payments by introducing late penalties. It may seem harsh, but late charges are common in many industries. Like a library book, if you’re late, it’s going to cost a little extra.
Ensure your invoice completely spells out your early payment discounts (if you are choosing to offer any) as well as any late penalties. Include exactly when the payment is due, including the date, time, and time zone. Lay out precisely what your late payment penalty schedule is to avoid surprising customers. Since your invoice acts as an official agreement of work, late penalties and all other charges must be clearly laid out for all parties to see and agree upon.
For further protection, create and have your clients sign a legal contract of work. This may seem harsh at first, but it’s simply good business sense. Of course you aren’t entering a new business relationship expecting a legal tangle, but if it should come to lawyers, you’ll be glad you have a clear contract to refer back to. Expect the best of your partners, but prepare for the worst: protect your business’s payments to ensure healthy cash flow.
Many different examples of legal contracts for services are available online at little or no cost, especially for small business. Just ensure the template you choose is valid in your country, state or region, as every country has different laws.
Another strategy to protect your business’s cash flow is to charge clients for significant expenses or the majority of the work up front. Especially if you are established in your field with a solid portfolio, many clients will be willing to pay a deposit or cover some of your expenses while you are completing the work.
Surprisingly, the most common reason SMBs don’t collect payment on invoices is because they don’t follow up on overdue bills. A simple polite reminder of outstanding or unpaid invoices will help you recoup payments from forgetful and tardy clients. Many invoice generators and online bookkeeping software will send reminder notifications automatically.
If email reminders aren’t generating any response, go old school and pick up the phone – or better yet, drop by the client’s physical office. It’s much easier to ignore an email than a real live human being. Plus, some personal contact might help you understand why your client is tardy on their payments. Perhaps they themselves are struggling with cash flow, and could benefit from a payment installment plan. A little understanding goes a long way towards gaining a loyal customer for life.
Contrary to what your frugal Grandma says, debt does not spell the end of your business. In fact, the accumulation and repayment of debt is an essential part of starting a business, especially if you’re low on funds. Strategic loans can allow your business to capitalize on unique opportunities while maintaining a healthy cash flow.
Conversely, you can encourage your business partners and customers to make use of loaned capital. Say your web design company has been hired to update a company’s page. Once the work is complete, the company expects a jump in new customers, and therefore profits. But how can they pay for the new web page if they need the profits to do so?
Enter Veem Capital. Paid Now allows users to access capital to pay bills and settle invoices over an extended period. In the above example, the company could use Paid Now to fully pay the invoice for their new website design, then pay back that capital using the profits from a freshly optimized site. Best of all, the freelance design company will receive payment for their work in a timely manner, ensuring a healthy cash flow. With just a small injection of capital, the situation becomes a win-win for everyone involved.
Need payments now? Find out how Veem can help with Paid Now. Learn More
Since businesses rely on their cash flow as lifeblood, there’s no such thing as being paid too soon. Whether it’s getting to know the resources available to your business, such as fintech, implementing change, or just finding the time to reach out, don’t let your invoices stack up and your business get put in the corner.
Veem has the tools to get your business paid faster than ever before. Skip the wasted time, the awkward confrontations, and the confusion with a streamlined online payment process. Your clients will be glad you did.
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