3 min read
Welcome back to Back to Basics - a refreshing revisit of some of the core foundations of credit control. This week we're continuing with the fantastic series The 7 Habits of Highly Effective Invoices, to revisit and refresh on the basics of how to get invoices paid on time. Over the coming weeks, we’ll continue to explore a new habit from the series each week.
Last week we looked at the most key piece of information your invoices need. This week we dive into Habit 3: Build on Solid Foundations.
An invoice has one purpose, and one purpose alone: to get paid on time.
At Chaser, we’re nuts about getting invoices paid on time. Welcome back to The 7 Habits of Highly Effective Invoices, our series on the most valuable things an invoice can do to get paid on time. These are taken from our Founder & CEO David Tuck’s experience working as a Finance Director and Accountant.
Habit 3: Build on Solid Foundations
A common misconception is that the work to get paid on time can only begin once an invoice has been issued. Yet there are lots of things you can do beforehand - even whilst the invoice is but a twinkle in the eyes of you and your customer. Habit 3 is all about laying the foundations. So that when your invoice is born, it has the best chance possible of achieving it’s life’s purpose: to be paid on time.
The wise man and foolish man chose the rocks and sand on which to build their respective houses, goes the song. In the (slightly) less well-known (but hugely popular in the Chaser household) invoice-specific version: the wise man built his invoices on thorough terms and conditions, clear expectations and a deal structure that enabled him to wield some leverage with his customer to get paid. Yes, we know what you’re thinking. And you’re right - it’s not that easy to sing.
Laying the foundations
Terms and conditions (Ts & Cs) are an invaluable foundation for your invoices. We’ve all had opportunistic customers who’ll give the “but I thought it was 90 day payment terms” response to requests for invoice payment. Having thorough Ts & Cs in place can neutralise this opportunism. Get your customers to sign them, either physically or digitally, before starting work together. Clearly set out your payment terms. Your invoices will thank you later!
“It’s all personal, every bit of business”, asserted Mario Puzo in The Godfather. No, we’re not advocating your customer wakes up next to a horse’s head. But you have lots of interactions with your customer before, during and after your work for them. Leverage these to lay foundations that will help your invoices get paid on time.
When I headed the finance team for a small drinks business, the team member taking a telephone order would remind the customer that “this order will be invoiced on delivery with payment terms due in 30 days. Is that okay with you?”. Our customer would make an explicit personal commitment that our invoice would be paid on time. And people remember commitments they’ve made. You’ll have lots of these opportunities to influence payment of your invoices. Don’t waste them.
The way you structure the work you do for your customer can also provide opportunities for foundation laying. The single most effective way to get your invoice paid is to have something your customer wants; something they’re not going to get until they pay your invoice. One thing I found worked well when selling marketing software licenses: we couldn’t control the monthly use of our product, but we could control access to analytics reports for that month’s usage. We would only release these once the relevant month’s invoice had been paid. It will naturally depend on the goods or services you are selling. But trying to find ways to retain something your customer wants can be a great tool to help you get paid on time for that work.
Build on Solid Foundations
Getting your invoices paid on time isn’t something to worry about once the invoice is due, or even once it’s issued. It should be part of the thinking from the minute it becomes possible that an invoice might exist; the very start of your discussions with your customer. It’s never too early to start putting foundations in place to help get your invoices paid on time.
Thanks for reading. Stay tuned for Habit 4: Be all present and correct.
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