The majority of all startups fail within the first few years of their founding, and more often than not it’s because of payment issues. Fortunately, there are tools and support available to help you identify problems early, and get paid sooner.
Quick takeaways if you’re in a hurry
- Using invoicing software like Xero can be incredibly helpful for managing finances and ensuring that payments are requested and received in a timely fashion
- Getting paid more quickly gives you better control over your finances, and allows you to rapidly work toward growth
- Features like invoice reminders, invoice view tracking, mobile invoicing, and instant online payment save time and help to streamline the process of getting paid both for you and your clients.
Read on: Simple ways to get paid faster with Xero
[Estimated reading time: 5 minutes]
One of biggest issues with managing incoming payments is keeping track of them all closely enough to quickly notice when problems occur. If there’s a problem with the invoice, the client didn’t receive it, or they are deliberately ignoring it, it can often take multiple follow-ups, phone calls, and sometimes legal action to rectify the situation.
These issues are exacerbated when you have to actively remember to follow up every few days to chase down the delinquent client. Many small businesses rely on collections agencies to deal with these problems, but those are expensive, they destroy client relationships, and take time to deliver results.
Late payments are always bad for business
Even if your business has the financial flexibility to survive late payments, it can still have very negative impacts that go well beyond just being irritating. Even if you can pay your workers and buy the supplies you need to operate, you’ll be missing financial capital that you could be using to ramp up marketing, pay for research and development, or push other growth factors that have a long term impact on the health of your business.
How accounting software can help
Accounting software like Xero exists to provide tools to small businesses that make it much easier to personally deal with the financial issues of your business on a daily basis. In terms of getting paid, that means invoice management. There are a few ways that Xero specifically works to help you get paid more reliably and more quickly.
Preventing invoicing issues proactively
Xero allows you to instantly send invoices via mobile device, and also allows your clients to pay for an invoice with the click of a button. Simple convenience can make an enormous difference, and goes a long way toward preventing administrative excuses from clients who try to blame late payments on internal bureaucratic issues. This way conversations about payment are likely to be more honest and revolve around real reasons why payment hasn’t been made.
Something else that shouldn’t be ignored is that accounting and invoicing software helps you to generate and issue highly professional looking invoices. While they’re legally the same as anything you can put together yourself, the look of your invoice and the impression that it gives can have an enormous impact on how highly it’ll be prioritised by a client who is trying to deal with their own financial issues.
Xero allows you to see whether your client has viewed your invoice after you issue it. Having that extra bit of information can be a vital tool for predicting what the problem might be on the client end. If the client doesn’t see it, you can immediately investigate to make sure that the invoice made it to your client in the first place. You’ll be able to avoid situations where mistyped emails or overzealous spam filters get in the way of timely payments.
If the client does view the invoice and doesn’t immediately pay, you’ll know to call and enquire if there was another problem that needs to be addressed. You’ll be able to behave proactively instead of being forced to rely on delayed signals from your client.
In dealing with clients who are already late, Xero provides support by allowing you to set three automatic follow-up reminders per invoice. This way you can rest assured that nothing is slipping through the cracks, and that you’re always on top of any developing situations with your debtors.
Developing Professional Consistency
By the time you get through all three reminders, you’ll know for certain that you’re dealing with a more serious issue that’ll require further action. Since you scheduled the follow-ups ahead of time, you and your client will both know what’s coming, and when. Besides simply being a professional way to handle things, this gives you a reliable schedule that you can use to hold clients responsible without turning payment issues into personal conflicts.
You’ll be able to ensure that your revenue streams and your response to payment interruptions are more consistent and reliable than they would be if you try to handle everything manually. This way you can spend less time worrying about money, and focus more on growing your business.