Proactive billing, also known as proactive recovery, is something that all businesses should be making use of. Hoping that clients will pay in time, having to constantly check if you’ve gotten paid, or making follow-up calls to your clients is a surefire way to lose your business. Especially in times of uncertainty. In fact, mismanagement of cashflow is the reason why 82% of businesses fail.
This is why it’s so important to take a long, hard look at your billing process and ensure that there are no gaps or bottlenecks for clients to fall into. If you find that you’re always chasing clients for payments, then your business is reactive in its process. You want to get proactive and have a system that brings money in on time.
Here’s how to set up your billing strategy so that your business becomes proactive:
Define Your Billing Cycle And Payment Terms
As a business, you are in charge of saying when customers pay you and not the other way round. If people want to buy your products or use your services, they need to pay according to a structure that makes sense for your business. Of course, you need to look at how you deliver your offering and who your target audience is to ensure that your billing cycle and payment terms are suitable and practical.
Different billing cycles are suitable for different types of customers and industries. For smaller sales, the billing cycle is usually on receipt, meaning that you get the money when the goods get delivered or the service is rendered. Larger sales can be on receipt or you can offer customers up to 30 days or 60 days to make payment. On recurring sales, you can opt to send monthly invoices and the billing cycle is usually anywhere between 7 and 30 days.
When you have experienced growth and are in a position to offer people a longer billing cycle, a great way to reward customers and ensure that you get quick income is to offer early pay incentives. For example, you can offer a customer a 10% discount for paying on receipt instead of in 30 days, and a 5% discount for paying within 10 days.
Set Payment Expectations Up Front
Once you have your billing cycle and payment terms, it’s really important to define the details in writing. They should clearly appear on all quotes and invoices you send out to clients. If applicable, they should also appear on your website. You have a duty to ensure that your customers know the payment expectations from your business before any goods exchange hands or you provide any services. This covers your business legally in the event of late or non-payment from a customer.
The next step is to tell your customers upfront before a sale is concluded how your business collects payments. Indicate who is considered the responsible party—the customer, the business the customer is buying on behalf of, an insurer or finance provider, and so on. Through this discussion, you can ensure that you have the correct contact details for the responsible party, and that they know how and when you expect payment.
Offer Self-Service Payment Options
Self-service payment methods are the best if you want to get paid on time. This includes banking transfers, online payments, using credit cards, paying via text or a phone call, in-store and using ewallets. The more payment options you can offer, the better. People like to be able to pay the way they feel comfortable and that fits in with their routine. The more flexibility you can give your customers for methods of payments, the better your payment collection rate and the better your customer experience.
Wherever possible, you should look for ways to securely store customer payment methods or even ways to set up automatic payments for recurring orders. Online shops or order forms can offer to store customer credit card details or link their ewallet accounts permanently so that payments are quick and easy when they return. You can set up debit orders for your customers so that a set amount comes off their account each month on a specific day.
By providing flexibility and methods to streamline payment, you make it much easier for your customers to pay you. This also puts the power in the customers’ hands and makes them feel in control of payment—which leads to a better relationship between your business and your customers.
Automate Your Billing Process
Automation is possibly the best business tool that has come out of the current digital revolution. It’s no longer prohibitively expensive for businesses of all sizes to use software to automate as much as possible without losing the personal touch that customers want.
A recent study showed that when automating company processes, 92% of the businesses polled saw an increase in customer satisfaction and 85% were able to source new revenue.
Automating your billing process will ensure that your invoices get sent out when a job or sale is complete and that any required follow-ups get sent timeously. You no longer need to worry about manually sending out invoices or manually triggering their release. Plus, there’s no need to check to see what’s paid, nor do you need to spend time writing emails to remind customers that they have an outstanding bill. The system will do everything for you once it’s set up.
You can set the system up to send out recurring invoices on the correct date every week, month, quarter, or year as necessary. You also don’t have to wait until specific dates to send out batches of invoices. The system will automatically generate the invoice per customer on the date that makes sense for their billing cycle with you. When it comes to reminders, your system should send out pre-determined emails or text messages in the days before payment is due. If payment becomes overdue, another reminder should get issued.
Whether you opt for automation or rely on printable invoice templates to streamline your business, the key is to always stay proactive. Once a proactive billing strategy is in place, you can keep tabs on your cashflow without wasting time or energy that’s better invested elsewhere.