If your company struggles with timely B2B invoice collection, it may be because your customers are choosing to pay other vendors before you. You are not your customer’s only vendor and your invoice is not the only one they need to pay; but someone has to get paid first- why shouldn’t it be you?
Think of it like this, your invoices are competing against other invoices and the winner gets put on the customers “high priority” accounts payable list to be paid before other invoices. Depending on factors like discounts, interest, item necessity and personal relationships, companies might be more inclined to pay other invoices first when there is enough cash to go around. But how can you give your invoices the competitive edge they need to get paid first? There are plenty of reasons you may not be getting paid before other vendors, but there are also plenty more ways you can move up the priority list. The first step in beating out the other invoices is figuring out why yours are not getting paid first to begin with; from there you can take the necessary steps to correct these issues and get one of those coveted high priority spots.
Sometimes the other invoices will get ahead of the game for reasons that are out of your control; for example, if your product is not essential to the customers’ business. While some situations are out of your hands, there are many more factors that you do have control over. The trick is knowing what they are and how to use them to your advantage. Here are some of the most effective ways to get your invoice paid first for faster B2B invoice collection.
MAKE IT EASY FOR THEM TO GET THE INVOICE APPROVED
If you are not already doing so, make sure your invoice is sent to the customer in a format that fits their requirements for processing. This will make a huge difference. If your invoice arrives ready to be processed and the invoices from other vendors require more work to get them in the right format, yours will be submitted first. It can be extremely helpful to utilize A/R management software that allows you to create custom invoice formats and assign them to the specific customer(s).
GET TO KNOW YOUR AP CONTACT
Be sure your bill-to contact information is correct. Sure, Jack might be the guy your sales team deals with but Jill is the person handling the invoice, so you want to make sure she is the one receiving the information. Double check this from time to time in case there has been a shift in your customers accounting department. While other invoices will be held up or sent to the wrong department, yours will already be on the way to the top of the AP pile.
OFFER EARLY PAYMENT INCENTIVES
If you are not giving them a reason to pay early, why would they? If you really want to get out ahead of the competing invoices, offering even small discounts for early payment could be exactly what you need. For example, if invoice terms are 30 days, offer a 2% discount if the customer pays in 10 days, so your terms would look like this “net 30/2/10.”
SEND A FLAWLESS INVOICE
Make sure you have all of the right information on the invoice before you send it, clear instructions for payment, and literally all the information they need to make a payment without any mistakes. Each mistake or question they need to contact you about pushes you down the list and gives priority to other invoices.
Your customers are just as busy, if not more busy, than you are. Sometime they have not paid the invoice because you have not reminded them to. In many cases, climbing to the top of their AP list is as simple as regularly following up and sending payment reminders. This can be one of the hardest areas for companies since many of them are understaffed and/or do not have the time to consistently and regularly send these communications. A/R management software can help by automating payment reminders so you can focus on nailing down the rest of these strategies and balance your other activities.
BE A STICKLER FOR PAYING ON TIME
Many vendors are not aggressive enough about B2B invoice collection and this is a great opportunity for you to get ahead. Remain professional but be consistent and persistent to let your customers know how important it is that they pay you on time.
If you are historically relaxed about invoices, if you do not have late payment consequences, or if you don’t enforce them, your customers may not take your payment terms seriously. With other vendors who are more stringent about late payment or who apply late fees will automatically become more important.
By working these strategies into your accounts receivable management, you should be working your way up to those high priority spots in no time at all.