Debtor Days Demystified: 3 Simple Ways to Get Paid Faster
- Marketing Manager
- 13 hours ago
- 2 min read
Are you constantly chasing late payments? You're not alone. Many small businesses struggle with what's known as
"debtor days"—the average time it takes for your customers to pay you.
The longer this period, the less cash you have available to run your business, pay bills, and seize growth opportunities.
In the short term, if you need a quick cash flow boost, a small business loan could be a great solution.
Here are three simple, effective strategies you can use right away to shorten your debtor days and improve your business's cash flow.
1. Set a Firm Foundation
The easiest way to get paid on time is to make your payment terms crystal clear from the start.
Offer incentives for early payment. A small discount for customers who pay within 7 or 10 days can motivate them to pay ahead of the due date. For example, "Pay within 10 days and receive a 2% discount."
Enforce penalties for late payments. While this can be intimidating, a late fee can be a powerful motivator. Clearly state your late payment policy on your invoices and contracts. This could be a flat fee or a small percentage of the outstanding amount.
2. Streamline Your Process
An inefficient billing process is a major cause of late payments. By making it easier for customers to pay, you remove a major roadblock to getting paid faster.
Automate invoicing: Use cloud-based software to send out professional invoices as soon as a job is completed or a product is shipped. This ensures there are no delays or forgotten invoices.
Offer multiple payment options: Provide a variety of ways for customers to pay, such as credit card, direct debit, or bank transfer. The more options you offer, the easier it is for your customers to pay you on their terms.
3. Proactive, Not Reactive, Follow-up
Don't wait until an invoice is overdue to follow up. A little proactiveness can make a big difference.
Send reminders: Use your accounting software to automatically send gentle reminders a few days before an invoice is due. This is a polite way to ensure your invoice is on their radar without an awkward phone call.
Pick up the phone: For larger outstanding amounts, a simple phone call can be the most effective solution. A quick, friendly conversation can clear up any issues or confirm a payment date.
By applying these simple strategies, you can take control of your accounts receivable and ensure your business has the cash it needs to thrive. It’s not just about getting paid; it’s about creating a healthy, efficient financial system.
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