If you catch more flies with honey, can you collect more payments with sweet invoice terms? The accounting software Freshbooks performed a study, in which they experimented with different invoice terms and saw whether wording affects the number of completed payments. The proof is in the pudding–or the payments–as well-chosen invoice terms mean faster payments. Here is a guide to help you add some fuel to your invoices with just the right words.
Wording That Works: Utilize These Invoice Terms to Get Paid Faster
Courtesy is Key
“Please” and “thank you” are not only polite–they can get you paid. According to the study, a simple thanks at the end of your invoice can increase both the percent of invoices paid and the speed at which payments are completed. Another invoice term to consider: the revolutionary “please.” For example, instead of simply declaring, “Payment due within 25 days,” try writing a politer statement such as “Please pay within.” In other words, phrase your conditions as genuine requests instead of automated demands. When you use invoice terms that sound as if they were written like an individual letter, you remind your customers that you are a small business. You are providing personalized customer service, which will help customers keep you in mind. After all, customers are more likely to pay a person than a machine.
Set specific terms
Lay down the invoice payment terms as clearly as possible. Set a payment date that is easy to mark on a calendar and gives the customers enough time to pay (but not so much time that they forget). Freshbooks suggests that the magic number for faster payments is 21 days, if your own cash flow needs can handle that gap. The invoice term of 21 days is easy for your customers to consider in weeks, while pinning down an actual date. Simply stating “3 weeks” might be too vague and translate to “sometime in the near future.” You may even wish to include the calendar date for when your payment is due, although that could be a double-edged sword. When you provide the exact date, customers have something easy and straightforward to write in their calendar. However, this may also prevent customers from paying early. Use this invoice term at your discretion. If you find that most of your customers are paying late, include the final payment date, so they cannot claim to have miscalculated the date. Unless you have a prearranged agreement, express that the payment should be in full.
You may wish to charge interest or suspend deliveries toward customers with an outstanding invoice. When you have consequences for delinquent payments, you should definitely introduce these repercussions up-front in your invoice terms. Otherwise, if you tell your customers after they are already late, they may think you are making up rules as you go along. After setting down the payment terms (including the date and whether you want the payment in full), state your conditions for late payment. If you are charging interest, include the rate of interest in your invoice terms. On the flip side, you might also wish to include positive incentives in your invoice terms as well. For example, you can offer a future discount for early payments.
Offer an electronic payment option
Perhaps the invoice terms customers like best are the ones that make payment easy. An electronic payment option, usually through credit card, will make you more likely to get paid. FISERV, an information management company for financial services, completed a study that suggests convenience makes payment faster and more consistent. The 2008 study analyzed 8 million telephone company accounts and discovered that people who received electronic bills were more likely to stay on as customers and pay their bills on time. You have several options for electronic payment, including direct debit, mobile payment apps, and merchant account services such as PayPal and Google Checkout. Many of these services will even generate customizable invoices for you.