The average wait for invoice payments can be as high as 60 days for the accounting industry, a statistic which highlights the need to improve the efficiency of firm’s payment options.
Positive cashflow starts by ensuring your accountancy practice gets paid on time. That means being proactive about providing simple payment options, to make sure it’s easy for clients to pay, the potential for late payments is reduced and income levels get a boost.
We bring you five key ways to keep the cash rolling in and prioritise debts in the best way.
1. Agree your payment terms and conditions up front
A clear credit control policy sets out your payment terms and becomes the foundation stone for good payment times for the firm. It sets out the expectations on both sides and gives you a clear document to refer to if (and when) client bills are not settled on time.
If you don’t have one in place, you can get a free credit control policy template here.
With your payment terms and conditions defined:
- Clients know how much to pay – based on your standard price points and the fees previously agreed in your proposal and engagement letters.
- Payment options are agreed – so clients know whether to pay via bank transfer, set up a standing order to your account, or agree to a Direct Debit mandate for cash collection.
- Payment timelines are clear – so your client’s accounts payable team know when payment is expected and if this should be completed within 14, 30 or 60 days etc.
2. Split up large fees into monthly instalments
Cashflow can also be a concern for your clients, so offering the ability to pay an agreed monthly fee across the year offers them a predictable way to break up the cost of their accounting fees – while also improving the frequency and stability of the firm’s own cashflow.
To make a monthly fee system work for the firm:
- ‘Package up’ services into regular monthly price points – where you offer packages at increasing levels of service and price for your clients. For example:
- Low-cost basic accounting package – covering accounts and tax returns
- Mid-priced financial support package – with more focus on business advice
- High-end ‘virtual FD’ package – where you advise the client’s board on strategy
- Adopt a value pricing model – where fees are based not on hours worked, but on the level of business value you’re adding for clients in each of defined service package.
- Make it easier for clients to pay – by splitting large fees across a 12-month payment model and bringing the firm a more predictable level of cashflow.
3. Use online invoicing as standard
Most modern accounting systems will give you the option of using online invoicing. Send your client invoices via email direct from your cloud accounting software, reducing the possibility of hard-copy invoices being misplaced and giving the ability to track when bills are viewed.
With invoicing is carried out in the cloud:
- Clients receive their online invoices immediately – so there are no delays and you can quickly check if invoices have been received, opened or paid.
- Key payment information is included – including your PO number, due dates and your main payment terms and conditions, reducing the potential for any delays.
- Payment buttons allow fast payment – with simple payment buttons using gateways such as PayPal, GoCardless or Square to let clients settle their bill with one simple click.
- Cashflow software tools allow tracking of payment – with apps like Fluidly, you can send out email reminders, track when they’re read and get in control of your outstanding payments – while also getting automatic forecasts of your cashflow position.
4. Automate your cash collection process
Cash collection, credit control and chasing up late-paying clients are all non-fee-earning tasks. So utilise the available tools and automation of online payment options and let the software do some of the hard work for you.
For many accountants, Direct Debit is an ideal payment option, with a solution such as Gocardless offering complete automation of fee payments.
To streamline payment with GoCardless:
- Clients fill out a simple online form – providing a mandate to collect fees by Direct Debit
- Recurring online invoices get raised each month – sent straight to clients via email
- Payment is taken on the due date – with GoCardless automatically collecting the cash
- Transactions are automatically reconciled – via an integration with your choice of accounting software platform.
5. Use Fluidly to manage cashflow and debtors
Automation isn’t just for payments: it’s just as easy to automate your cashflow management and credit control functions. The Fluidly app gives you an overview of the firm’s cash position and automates reminder emails and call-scheduling when chasing and managing your late-paying customers.
With Fluidly integrated with your invoicing and accounting software:
- Cashflow and aged debts are managed through one tool – giving you a holistic overview of cash coming in, debts outstanding and the firm’s cash position now and into the future.
- Debts can be prioritised – so you chase debts in the right order and tackle the most important bad debts first, increasing the effectiveness of your credit control time.
- Email reminders are sent out automatically – so clients are chased at intervals you define, based on the due date and how agressively you want to follow up.
- Phone calls are scheduled – with notification reminders sent out to your team, so chasing calls can be promptly made.
- Debtor statements can be sent – listing all late invoices and outstanding debts for a specific client, making it easier to chase the whole debt.
- Cashflow predictions are created automatically – so you always have a real-time overview of your payments and cashflow position.
Get smart with your payments and cashflow
By combining the right software tools, a significant chunk of the cashflow and credit control workload can be reduced – and that means more time for the firm to focus on client relationships, high-value advice and bigger fees (and profits) for the practice.
With payment automated, email and phone chasing of late-payments systemised and a focused view of your aged debtors and cashflow, you’re back in control of when you get paid.