According to a recent survey, in the UK, it is estimated that small businesses – including freelancers and contractors - are paid on an average of 21 days late. In the US, you are most likely to see the very same situation where several new businesses seem to be struggling to be paid on time. But the actual question to ask is how much control do you have over when you get paid. Here are some compelling facts about how small businesses are preventing the late-paying cycle - the results will surely shock you. According to a recent analysis of invoicing data, there was a group of small business owners that were not only breaking the late-payment cycle but were also being paid within five days. Shockingly, the connection between these invoices wasn't based on payment terms rather it was based on recency also known as how quickly invoices were issued after a job was completed.
The Impact of Invoicing Quickly.
A further look at at the analysis showed that an estimated 16% of business owners issued an invoice after two months of completing the work and their last timesheet entry. It is a common practice amongst the majority to send the invoice within seven days of completing the work however, half of the invoices were sent after a month of job completion. If you delay your invoices, it is most likely that your clients will delay payments too. This is true because business owners who sent their invoices within a week of the job completion were paid within five days or fewer. If the invoice was sent a week later, the delay in payment was doubled to ten days.
Surprisingly, invoicing quickly seems to override the invoicing terms. If you have completed the job before the mentioned duration and send your invoices after 15 days of completion, it is most likely that you will be paid quickly regardless of the agreed payment terms. For many small businesses getting paid as quickly as possible is considered as a holy grail for them. That's why small businesses should invoice as quickly as they.
The Importance of Quick Invoicing.
Invoicing as quickly as possible will allow you to benefit from ‘recency bias’. This basically means that your client will assign more importance to recent events as opposed to those that took place in the past. Therefore, after immediately completing your work, it is imperative to send your invoice quickly so that your client gives more importance to it as he/she just saw the results of your job. This also helps investors contemplate which funds to purchase and guides managers on rating their employees. Invoicing quickly will also show your client that this money is crucial to you and should be taken seriously by the client as well.
The Benefits of Invoicing As Quickly As Possible.
One of the key advantages of invoicing quickly focuses upon improved cashflow upon which the success of many small businesses hinges. As a small business owner, you should keep in mind that sometimes the most effective solutions are the simplest ones and with certain adjustments, you can drastically impact your cashflow. Apart from improved cashflow, invoicing on the same day straight after completing a job can save time and money significantly.