Speed up payments from customers
New invoicing research from FreeAgent finds zero-day payment terms could help your small business clients get paid in a week.
Whether it’s clients “forgetting” to pay, stalling for time or sometimes just deciding not to pay at all, chasing late-paying customers is a common frustration for freelancer and small business clients.
FreeAgent, who provide online accounting software for small business owners, freelancers and their accountants, investigated the effects of different invoicing terms on payment times. The results indicate that business owners who normally issue invoices with 30-day payment terms could be three times more likely to be paid within a week if they make a few clever tweaks to their payment terms.
Fiona Christie, a Data Scientist at FreeAgent, explains the research. She said: “We started by looking at invoices issued by FreeAgent users from 2015 with different common payment terms (30, 14, seven and zero days) and comparing how often these invoices were paid “on time” (i.e. before the invoice term expired)." Here’s what we found:
This suggests that the most effective way to be paid on time is to have a 30-day payment period. However, when we looked specifically at how many of these 30-day invoices were paid within seven days of being issued, the results were surprising:
If your freelance and small business clients tell their customers to pay them immediately, our research suggests that they’re more than three times as likely to be paid within a week than if they use 30-day terms.
Shorter invoice terms could make life easier for your freelance and small business clients
While setting longer payment terms may mean that your small business clients are more likely to be paid “on time”, if they’re looking to get the money they’re owed quickly, our research indicates that they should either set a seven day or a “pay immediately” zero-day term.
In conclusion, our results show that with shorter payment terms, freelance and small business clients are more likely to get the cash owed to them within a week and will be less likely to have to worry about chasing up outstanding invoices. After all, we’ve all got better things to do!
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About the author
Fiona Christie became FreeAgent’s second data scientist, having graduated from the University of Glasgow in mathematics and statistics, including a year's placement at the University of California Davis. Fiona primarily works on applying her statistical knowledge to understanding customer behaviour.
To find out more about FreeAgent, visit their website or call 0800 025 3900.
This blog is one of a series of articles from our commercial partners.
The views expressed are those of the author and not necessarily those of ICAS.