Daniel Reiter for the FreshBooks blog writes:
We wanted to understand if there are any patterns to getting paid faster, so the FreshBooks Data Analytics team did some digging into what FreshBooks customers use as invoice payment terms in 2019, and what the impact of those terms have on client payments.
Turns out if you give your clients more time to pay, they’ll take it: Putting “30 Days” in your payment terms has lower time-to-paid percentages than the “All Invoices” column.
One of the most glaring takeaways is that asking for payment sooner will get you paid sooner.
Your key takeaway to [getting] paid faster is to ask for payment within 7 days and start charging interest on unpaid invoices. Throw in a “Thank You” and you’ve got your bases (and your client relationships) covered!Use Your Payment Terms to Get Paid Faster
Regardless of your billed revenue, as a solo consultant (or small firm) you are only as viable of a business as your liquidity.
Your business will die – even it bills out a billion dollars – if it doesn’t collect it fast enough to pay your own bills and your own salary.
I’ve been pestering anyone who will listen about this sort of thing for years (e.g. here).
Invoicing and collecting on your accounts receivable is generally not an exciting topic for most business owners. But cash flow is the blood flow of your business. When you think of it that way, perhaps it’s worth an afternoon or two of tweaking.
My suggestion for invoices:
“Due upon receipt. 1.5% per month financing charge applicable if not paid within 7 days. Don’t hesitate to let me know if any concerns or issues. Thank you!”
(Check your local laws; I’m told that many states regulate what the maximum annualized late payment interest percentage can be. Mine works out to 18%. If unsure, remember I’m not providing legal advice. A safe bet might be to see what your local utility companies have in their fine print and match it).