Paid InvoiceAccording to a survey carried out by Reuters in April, nearly half of SMEs are concerned about cashflow issues impacting on their business over the next year.

The time between sending out an invoice and receiving payment can sometimes seem like an immeasurable and uncontrollable variant which impacts on many other aspects of the business, but here are some tips to keep problems at bay:

Clear payment terms

Make sure that your payment terms are clearly set out on all invoices. It can be helpful to set a clear time frame, such as ‘within 7 days’, as this allows you to communicate with the client how long they have left before the payment is overdue, or exactly how long overdue it is. Including the due date on the email you send with the invoice also sets a clear precedent for payment time.

Chase early and methodically

Don’t let the payment terms drag on before chasing. Once you have chased once, follow up periodically, reminding the customer how overdue the payment now is. Ensure that your language is formal but polite. Some good templates for invoice chasing messages can be found here.

Communication and clarity

It’s important to communicate about cashflow and payments – people can be reluctant to ask their clients for overdue payments, and this is prudent as relationships can be delicate. But it is important to be open and upfront; everyone understands that cashflow can become an issue, so don’t be afraid to communicate. Being open from the beginning can prevent loss of relationships later on, when you may be forced to withdraw your services, for example.

Spread out payments

Giving clients the option of paying in instalments can prevent the mental block of not wanting a lump sum to leave their account, and aids their cashflow as well as yours. It also helps to have a mix of client payment times, some paying on longer term contracts, and some shorter term.

Know your expense timetable

Every business has expenses which leave the account at a set time each month, and these are just as much a part of the cashflow issue as payments coming into the account. Make sure you account for when payments are leaving and work your invoicing timetable around this wherever possible.