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Getting your invoices paid early

Getting your invoices paid early

Is it possible to encourage customers to pay invoices before the due date?
Aggressive Dog's tend to help when asking for payment

If your nickname’s Slasher and you happen to visit your customers with a two hundred pound Rottweiler, I suspect you have no issue getting invoices paid (probably in cash too), but for most businesses, getting paid at all is a bonus.

Getting paid early is a pipe dream.

There’s an entire government department setup solely to discuss and resolve the late-payment issue and so far all it’s managed to come up with is a system where big business have to report how quickly they settle their invoices. They are then awarded either a red, amber or green status. Quite how that’s meant to get you paid quicker, I have no idea. Perhaps the same group of problem solvers will now move on to sorting climate change, so expect nothing to change there too (except the climate, obvs.)

The sad truth is, businesses are so busy chasing overdue payments (61% of invoices are paid late) that by the time you’ll actually get to ask for an early payment, it’s likely to be past its due date anyway!

SETTLEMENT DISCOUNTS CAN PUT YOU IN THERAPY

Share the love as you extract their money

With the benefit of hindsight, I can tell you the only thing worse than poor cashflow is the false sense of hope you get by offering a settlement discount. Just writing about it winds me up…but in a bid to stop you making the same mistake, I’ll go on.

Several years ago, my cashflow was so poor, I offered a 5% settlement discount for early payment. To make sure my customers got the message, I invested in a rubber stamp and red ink pad. My accounts department spent the rest of the day thumping it out on each invoice we raised. By lunchtime there were red fingerprints all over the office.

PAY WITHIN 14 DAYS AND DEDUCT 5%

Even though I was giving away a massive slug of margin, the anticipation of payments rushing in gave me the best night’s sleep I’d had in months. I dreamed of my bank manager calling, begging me to put the excess cash on deposit. The next day I rushed into my office early to prepare myself for the deluge of payments.

Day 1. Nothing
Day 2. Nothing
Day 3. The accounts office of my only prompt paying customer calls to thank me for giving them 5% for doing what they always do — pay early. 
Day 30. The remaining few prompt payers send in payments. Each of them have deducted the discount. 
Day 75–120. The usual stream of slow payers send 95% of the invoice values, knowing full well I’m not going to bother chasing them for the paltry 5% that I’ve gifted them. I hate them all.
My sales manager tells me he’s struggling to maintain sales value as pretty much all our customers think if we can afford to give away 5%, our margins are too high.
Day 121. Neville, my book-keeper reminds me we still have to raise credit notes for the farty little amounts that we’re having to write off, otherwise our books won’t balance.

CREDIT NOTES…ADMIN…

Prepare to be left with lots of small balances owing -  and the mountain of credit-notes you'll need to raise

In short, I’ve lost 5% of a month’s turnover and had the added expense (and hassle) of raising credit-notes, not to mention the cost of a certain rubber stamp and various cleaning fluids to remove the red stains all over our office.
Our company pricing structure has also been questioned.
And our cashflows worse than ever. 5% worse in fact.

At this point, I’d like to be able to tell you how I turned it around and made everything right. But I can’t. 

The SDS (SDS = Settlement Discount Saga. I still find it difficult to utter the words) lasted for two months. The mess it created took many more months. 

I now live in a caravan selling daisy chains*

*Not really. I spent the next decade vowing to solve the issue of late-payments. And that’s how peasy.com was born.

David Landsberg
Co-Founder & CEO

Getting Customers to Pay Quicker — and Love you for it

peasy.com

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