Cash Flow Masterclass 2.1

Business Cash Flow: 6 Ways To Speed Up Invoice Payments

• Slow invoice payments put cash flow at risk for businesses.
• Simple changes like writing clearer invoices, setting shorter payment terms and automating reminders can help.
• Subscription models, staged payments and small incentives can keep money moving without straining customer relationships.

Getting paid shouldn’t have to be a struggle and with a few simple tweaks, the task will be made much easier.

If you’re thriving on paper but your bank balance insists otherwise, you’re far from alone. Late invoice payments are one of the biggest frustrations business owners face, explains financial coach and founder of The Profit Analyst, Gavin Smith, who doesn't mince words. “It’s great to be making profit on paper but if you’re not getting paid for it, it’s meaningless.”

The good news? A few clever tweaks to your processes can make all the difference in getting those invoices paid faster (without souring client relationships).

Smith recommends: 

1. Writing invoices that encourage fast payment

Rather than accepting “industry standard” invoice payment terms of 14 or 30 days, Smith recommends setting your own rules upfront. “Usually the bigger the business, the more ridiculous their payment terms are but there’s no harm in insisting on better terms for yourself.”

Remember, a professional, easy-to-read invoice clearly outlining who the payment should go to, as well as the due date, shows you mean business. 

2. Setting up direct debit or subscription models

Forget sending invoices and chasing people and considering swapping to upfront or automatic payments. Smith says he switched his clients to a subscription model and has never looked back. “You sign up on day one if you want to work with us, it was as simple as that,” he says. No more chasing, no awkward follow-ups on invoice delays, just predictable cash flow. While subscription models can have fees attached, it’s worth doing the math to see if a set up like this will work for your business – without impacting customer satisfaction. 

3. Breaking payments into milestones   

If a subscription model doesn’t suit your business, Smith recommends considering whether staged payments for large projects might be a better fit. Instead of waiting for a lump sum, ask for a deposit upfront, then break the rest into milestone payments which can be weekly or monthly. “It can take away the stress of waiting to get paid,” he explains.

4. Using tech to automate reminders

Accounting software isn’t just about bookkeeping. Set up automatic reminders so clients get a polite nudge – whether it’s three, seven or 10 days after the invoice is due.

The beauty of these systems is you can “blame the system” for any prods that a client could potentially take personally. “If you’re emailing to say, ‘How come you haven’t paid me yet?’ that’s awkward,” says Smith. “This way you can say, ‘Oh sorry about that, it’s just an automatic reminder,’ and you can hide behind it.”

5. Offering early payment incentives (carefully)     

Offering a small discount for payments made within 7 to 14 days can motivate faster settlement but Smith advises exercising caution if you’re going down this road. “What you don’t want is to be giving up your profit margin to make people pay earlier so you have to make sure you’ve built the discount into your pricing model so you’re not eroding profit.”

6. Following up quickly and politely

Finally, a reality check: friendly follow up emails for invoice reminders can be the difference between being first in line or last on the list. Smith recommends having a clear internal process centred around checking outstanding invoices regularly, acting quickly if one slips and setting controls around how far you’re willing to go before you stop work.

So next time you finish a job? Send the invoice immediately. Your future self (not to mention your bank balance) will thank you.

Disclaimer: The information on this page is solely for educational purposes. It has been prepared without considering your objectives, financial situation or needs, you should, before acting on the information, consider its appropriateness to your circumstances and if necessary seek the appropriate professional advice. Any opinions, conclusions or recommendations are reasonably held or made, based on the information available at the time of publication, but no representation or warranty, either expressed or implied, is made or provided as to the accuracy, reliability or completeness of any statement made.