If your customers aren’t paying their bills on time, take a look at the design and wording of your invoice. Be critical. Ask a few customers for their opinions. Talk to your staff and CSR’s about what they see and hear from customers.
Armed with this information, you can likely make a few simple changes that will improve the rate of on-time payments, which is important to your cash flow. According to U.S. Bank, 82 percent of small business failures are tied to cash flow problems, so this can be crucial your business’ success.
We’ve learned a lot about invoice design though assisting our customers in the redesign of theirs. Here are eight tips on how to adjust your invoice design to encourage customers to pay on time or even early.
Be clear about when payment is due.
Don’t tiptoe around a payment due date. Vague language like “pay upon receipt” gives customers license to put your bill at the bottom of their to-pay pile. The same goes for “due within 15 days of receipt.” After all, who’s to say when the bill arrived? Include the exact date bill payment is due, for example, May 15, and make this date stand out by printing it in bright red. The online bill processor Due found that bills are eight times more likely to be paid on time if the invoice includes a due date. This seems like common sense, yet, studies show about a quarter of invoices don’t have one.
Shorten your payment terms– instead of 30 days, try 15.
Do you give customers 30 days to pay their bill? That might be too long, especially when yours is a regular, monthly bill that should be part of a household’s budget. Tightening that payment window to two weeks could result in a higher payment percentage; the longer a bill sits around, the more likely it will be forgotten and paid late.
Charge a fee for late payments
When it comes bills, none of us want to pay more than we actually owe. Showing your customers how much more they will pay if they miss the payment deadline is motivating. Be sure and include the fact you charge a penalty and how much it will be on your invoice. In Waynesboro, Va., the city-owned water company adds a penalty equal to 5 percent of the water bill for late payments. For a $100 water bill, the charge would be $5. Multiplied over a household’s worth of bills, late fees can add up.
Make page 1 of your bill simple to understand.
We all get a lot of multi-page bills and although much of the information is interesting and informative—like those graphs that show how much our water use jumps when we try to keep our grass green in the heat of summer–avoid squeezing too much on your first page. Trim the opening page down to the basics—what the bill is for, how much is owed, when it is due, where to send it and who to call with questions.
Make it clear who the invoice is from.
Using your company logo allows customers to quickly identify your invoice. Use it at the top of your bill—in color—and on the mailing envelope as well.
Encourage customers to move to epayment or auto pay
If you aren’t capitalizing on the millions who are moving to mobile payments, you had better. According to eMarketer, last year, 55 million people in the U.S. used mobile payments; this year it is projected to be 61 million.
There are a lot of ways to encourage your customers to use epayment. It’s critical that the system allows payments to be made with minimal interaction, for example, a “pay here” button that requires only a step or two. An easy-to-use system is a sure way to sway customers who are still writing checks and sticking stamps on payment envelopes.
If it’s automated, you always get paid on time.
Automating anything—from contributions to your retirement account to payments for your gym membership—requires nothing more than a one-time sign up. Customers who always have sufficient funds in their bank account will like the convenience and simplicity of automated bank draft programs and you will like knowing that these payments will always be made on time.
Some companies offer incentives like discounts or other perks to get customers to sign up.
Offer as many ways to pay as possible.
ePayment is quick and easy, but not all customers will go that route. Provide as many ways for them to pay bills as possible: by check, credit card, PayPal or a similar system, automatic bank payments or in-person. New options will undoubtedly come along, so keep up with trends and options and if they would appeal to your audience, add them to your payment methods.
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