Boost Your Business Cash Flow: 5 Tips for Getting Paid Faster by Customers

In partnership with Bill.com

By Rieva Lesonsky

Cash flow is the lifeline of any small business, so when customer payments are late, or you find yourself too often waiting (and waiting) for a big paper check, it’s time to get proactive about getting paid faster.

The following five tips will help you get paid faster by customers to improve your business’ cash flow.

5 tips to get paid faster by your customers

1. Offer discounts for early payments

Offering a discount to clients for early payment is a win-win for both your business and the client. Clients get a small discount, improving their cash flow. Likewise, your company gets its money quicker, improving your cash flow. Early payment discounts—also referred to as prompt payment discounts—are usually a small percentage of the total amount of the invoice, such as 1-2 percent.

Overall, offering discounts is a good incentive for clients to pay early, and it reduces the risk of customers skipping out on payments. It also promotes goodwill between your business and your customers, and increases the chances of repeat business.

However, it’s vital to pick and choose which customers receive an early payment discount since discounting a hefty invoice could severely cut your profits. Also, beware of customers taking the discount deal even after the early payment deadline has passed.

In addition, most businesses do not offer early payment discounts to customers that pay via credit cards because your business has to pay fees to the credit card companies.

Finally, it’s essential to ensure the discount gets accurately recorded in the company’s accounts receivable program, so it doesn’t look like the customer did not make the full payment.

2. Charge late fees to get paid faster by customers

Less a punishment and more of an incentive, charging late fees can help your business get paid faster. Inform customers at the beginning of the transaction or agreement about the late fee and print the fee structure on the invoice. Late fees are calculated using an interest calculator, which determines the cost based on the number of days the payment is late.

Be aware that maximum interest rates vary by each state’s usury laws, so check with your accountant or attorney before setting your fees.

3. Get paid in installments

Although they are typically used for larger invoices, you might consider setting up an installment plan for some customers. Even receiving half the payment upfront can help improve your business’ cash flow.

Also called a “good faith payment,” the money serves as a security deposit towards the final price. Good faith payments are typically nonrefundable and must be documented clearly in writing. Once a good faith payment has been made, it’s more likely the final payment will also follow.

4. Send reminders to overdue customers

Sending periodic reminders about impending payment due dates can increase the possibility of getting paid faster and can easily be set up by an automated accounts receivable program. Set up your invoicing program to send out an overdue notice as soon as payment is late. Delaying payment reminders tells your customers you don’t need their money, and they may take even longer to pay.

Reminders should always contain a copy of the original invoice, details of the purchase, and the amount owed, including payment terms and late fees. In addition, list all the payment methods you accept and include the phone number and email of the person to contact about the invoice.

5. Allow customers to pay the way they want to

Because customer preference for payment methods varies so much, it’s essential to offer as many payment solutions as possible. According to a new report on consumer payment preferences in 2021, debit cards or direct bank debit is the most popular way customers like to pay. When there are recurring payments, customers prefer to set up auto-payments.

Preferences also vary by age—older customers prefer credit card payments, while younger generations prefer mobile and digital payments that take money directly from their bank accounts. The easier you make it to pay you (for example, directly from an invoice), the faster you’ll see the money come in.

Improve your cash flow by automating your finances

Read about how Bee Nance, Director of Finance and Talent at nonprofit educational organization Generation Teach, was able to automate the company’s finances online, get out from under a pile of paper checks, and ultimately improve Generation Teach’s cash flow so it could focus on its core mission of helping teachers and students.

In partnership with Bill.com. Getting paid on time and improving your cash flow starts with how professionally you set up your accounts receivables. A company like Bill.com helps automate your business’ accounts receivable process by digitizing how you get paid. In addition, Bill.com assists businesses with recurring invoices, payment reminders, overdue reminders, and lets you accept domestic ACH, virtual cards, or checks, all through a branded portal—making it easy for your customers to pay electronically.