Why billing & payment matter
There’s a big difference between sending an invoice and getting paid. Slow-paying customers extend your cash-conversion cycle and reduce liquidity. By refining your invoicing and payment processes, you can receive cash sooner and avoid cash crunches.
Identify payment bottlenecks
- Invoice accuracy: Mistakes or missing information in invoices can lead to disputes and delayed payments.
- Billing timing: Do your invoices reach clients when they are ready to pay? Mailing invoices at the wrong time can delay payment.
- Payment terms: Generic “Net 30” terms may encourage customers to delay payment; clear due dates signal when you expect payment.
Strategies to speed up payment
- Bill promptly. Issue invoices as soon as goods ship or services are delivered. Sending invoices early and stating payment is due within a specific timeframe encourages faster payment.
- Set explicit due dates. Instead of “Net 30,” specify a due date (e.g., “Due 25 June”). This simple change can shave days off your payment cycle.
- Offer incentives. Provide small discounts for early payment or require deposits for large orders. Incentives encourage customers to pay promptly.
- Use electronic invoicing and payments. Automated invoicing systems reduce errors and deliver invoices instantly. Offer multiple payment options (credit card, bank transfer, online payment portals) to make paying easy.
- Follow up on overdue accounts. Contact past-due customers to ask when they expect to pay. Frequent reminders signal that prompt payment is important.
- Review payment terms with vendors. Negotiate payment plans or ask vendors for extended terms so you can keep cash longer.
Collect cash, boost growth
When you combine accurate, timely billing with clear terms and automated reminders, you shorten the time between delivering your product or service and receiving payment. Shortening the billing and payment cycle releases cash you can reinvest in your business. To maximise results, apply these billing improvements alongside the other steps: shortening sales, production & inventory, and delivery cycles.