NFIB

How to Speed Up Customer Payments
03/ 14/ 2002

Many small businesses operate on this simple invoicing system: when the job is finished, send out a bill and wait for payment. While this system is usually sufficient, there are times when payments need to be speeded up. In today's Workshop, Jeffrey Moses offers suggestions for speeding up your customer's payments without pressuring them unnecessarily.

One way to speed up payments is to make sure that invoices go out when they're supposed to. When a job has been completed or products have been sold, an invoice should be mailed within 24 to 48 hours.

To assure that invoices are mailed promptly, make sure procedures are in place to notify your billing department about all jobs performed. That way the staff in your billing department can set up invoices, leaving blank the final dollar amount and other billing details that will be supplied by sales or other appropriate departments. Quick billing depends on systematic procedures and coordinated efforts between all departments involved.

Another way to speed payment is to send invoices when the order is taken, rather than waiting for the procedure to be completed or products delivered. This works best for companies that supply products or services for which an exact dollar amount can be determined when the order is taken. Service-based organizations frequently are forced to wait until a specific job has been finished before invoicing the customer. In this case, invoices should always include the statement: "Payment due upon receipt."

Small businesses have numerous options for speeding up payment after invoices have been sent out. Here are just a few:

1. Offer cash discounts for payments received before a certain date;
2. Offer discounts to customers who wire funds instead of sending checks, since wired funds customarily arrive in a single day and are usually credited immediately;
3. Allow customers to pay with credit cards for payment; and
4. Charge interest on accounts that are outstanding for a pre-specified period. (Remember, it's important to always inform customers of such interest charges prior to billing.)

After payments have been received in your office, you'll need to make sure your employees process payments quickly, and deposit them immediately after processing. A check that sits around your office for a week before being deposited is no different from an original invoice being mailed a week late.

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