Cashflow: Managing your invoicing to get paid faster

Invoice on time

It goes without saying that the longer you take to invoice, the longer it will take for you to be paid. Invoice as soon as you can and aim to complete any work as quickly as possible. Electronic invoicing - or indeed invoicing through accounting software - is the fastest way of invoicing. It ensures minimal effort and error in set up as it creates automatic records, and also means invoices can be sent quicker as well.

Set out clear and timely payment terms

Make the payment terms and conditions clear to your customers as early as possible and at the point of invoicing. Your invoices must clearly show the date that payment is due and also include the terms and conditions of payment on your invoices – including any late payment penalties. This means clients are well aware of your expectations.

Different industries have different conventions for payment terms and not all use payment terms of 30 days. Some businesses ask for a deposit or full payment up front. Others who provide regular services to customers, such as gardening or cleaning, ask for payment within seven days.

For more information on payment terms and what to include on your invoices see mygov.scot.

Get paid faster

Where possible, encourage your customers to pay via electronic payments. Electronic payments like BACS or CHAPS are fast and easy to keep track of. Depending on your sector, for cashflow it may be worth supporting payment by credit card even though there are extra costs with this.

For regular purchases, encouraging customers to set up direct debits can be very helpful and reduce admin for customers too. Try to avoid being paid by cheques to prevent the risk of bounced or lost cheques.

Offer early payment incentives

If late payments are - or are likely to become - a particular issue, you can encourage faster payment by offering your customers early payment discounts. This can help to speed up payments, improve your cashflow and reduce bad debts.

Stay on top of late payments

You must always know what money is coming in and when it is due. This is key to your cashflow management and will help you identify late payments.

If the balance of your incomings and outgoings is becoming tighter, you will need to keep on top of any late payments. First, you can look for any red flags from your customers that may signal late or non-payment - including changes in their buying behaviour, increased invoice queries, less contact from them than usual, etc. This could help you act before late payment becomes an issue.

If late-payments are already a problem you should follow up and escalate immediately and, if this fails, look to implement credit control procedures.

More help

Read our article about understanding cashflow for more information. If you are concerned about how to manage invoicing and late payments, please contact your local office or see Find Business Support for more information.