6 Ways to Get Your Invoices Paid on Time
If you’re having trouble getting invoices paid by your customers, you’re not alone. A 2016 study from Fundbox found that 68 percent of small businesses are affected by late payments.
This puts business owners between a rock and a hard place. It’s frustrating to spend hours following up on past-due invoices, but it’s even worse to hold off on hiring, upgrading equipment or paying your vendors because of a cash-flow pinch. Still, client relationships can be fragile. Repeated phone calls and late fees don’t always go over well with the people who hire you.
Predictable revenue keeps you focused on the task of running and growing your business. Simply put, positive cash-flow keeps the wheels greased. Here are a few ways to make sure you get paid as quickly as possible for your hard work.
1. Accept All Forms of Payment
The easier it is for your customers to pay, the more likely they are to pay on time.
Paper checks, for example, may seem like a thing of the past, but according to a survey by the Association of Financial Professionals in 2014, businesses within the U.S. still pay half their bills by check. According to the Wall Street Journal, “That’s down from 74% in 2007, but the rate of decline has slowed, suggesting stubborn barriers to change.”
Clearly list your company’s name and mailing address on your invoices. If you don’t have an office, list a P.O. Box or your home address. Make it impossible to misinterpret where checks should be sent and when they’re due.
Credit and debit cards
Credit and debit cards are easy to use and therefore a form of payment that will help you get paid on time. Some of the best and most popular merchant credit card processing services include:
ACH Bank Transfers
Bank transfers are often the cheapest and easiest way to move money. QuickBooks offers free ACH transfers, meaning customers can deposit funds directly in your checking account with no fees.
This is especially helpful option for customers that you work with on an ongoing basis. Just setup the account and routing numbers once, then collect 100% of the money you’re owed.
It’s easy to pay and receive payments with Paypal, and it only takes a few minutes to get started. The receiver—i.e. the invoicer—is responsible for the fee of 30 cents plus 2.9 percent on every transaction. (Remember, these fees can be deducted as a business expense.)
On top of this, PayPal and QuickBooks sync beautifully together so you can offer customers this payment option without creating additional bookkeeping.
2. Create Accurate, Easy-to-Understand Invoices
When your revenue relies heavily on getting those invoices paid, it’s worth investing a little time in making them as clear as possible. Even the slightest ambiguity will slow things down.
Make total and due date clear
Start by making the payment amount and due date stand out. The customer should easily be able to identify how much they owe and by what date. These are two of the most important components of receiving prompt and accurate payments.
Discuss costs, fees, upcharges and overtime rates up front. Then, itemize these costs on the invoice. Customers want to know exactly what they are paying for. The fewer questions they have about their invoice, the faster you’ll get paid.
Send it to the right person
Depending on your business, you might invoice people or other businesses. Ensure you have the right contact information when sending out the final invoice—for businesses, this might be a CPA or someone in their accounts receivable department. Set yourself a reminder to verify this information on a yearly basis, too. The fewer hands the document has to go through, the faster you’ll see payment,
Track and simplify
Always include a unique number with your invoice as this will make it easier for both parties to record, track and follow up. Consider using simpler language too, like “days” versus the term “net” when listing out how many days until payment is due. Clearly state the details of your invoice terms and make them easily trackable to avoid any miscommunication.
3. Be Timely
Don’t wait too long to send out your invoices. The quicker you do so after performing a service or providing a product, the more top-of-mind the work will be.
Here are some ways to ensure your invoices get out quickly, and into the right hands.
Don’t underestimate promptness
Send out invoices according to the timeline stated in the contract, or at the very least, as soon as the project is complete. Don’t make your customers request an invoice to pay you.
Automated invoicing, one of the most helpful features in QuickBooks, allows you to create an invoice template that can be used over and over again. You can even schedule recurring invoices so you don’t have to spend time preparing them manually.
Be persistent with follow up
Larger projects and invoices may take some following up before payment will be received. Don’t be afraid to follow up on larger invoices a couple of times before the payment due date. Customers and clients are busy, and a payment reminder is often welcomed. QuickBooks can help here too—you can set automated email nudges to remind customers that a payment is due.
4. Establish Penalties
Small business owners tend to shy away from assessing late fees for fear of upsetting the relationships they’ve established with customers. Think of penalties as a way to promote timely payments, not punish your valuable customers.
Businesses get into trouble with late fees when they aren’t expected. Explain them to customers in conversation and state them clearly in your contracts for complete transparency. Late fees should never be a surprise.
Here are a few ways to implement penalties for late payment:
Flat late fees
A flat late fee is a specific dollar amount that’s useful when dealing with smaller invoices.
For example, assessing a 2 percent late fee on a $200 invoice only comes out to $4, which is hardly motivating. Instead, you could implement a flat $20 late fee to all invoices less than $1,000, then assess 2 percent on anything over $1,000.
In addition to charging a late fee, whether it’s a flat fee or a percentage, you can also assess an accruing interest charge for every week or month that payment is late. The terms of this percentage should be laid out in your contract or payment policy. An example would be to charge 2 percent capitalized weekly until the invoice is paid.
Finance charges cover the gambit of flat fees, a percentage of the invoice amount, accruing interest and any other forms of fees you assess clients for failing to pay. QuickBooks has this feature built-in, so you can assess any finance charges to outstanding invoices without a huge hassle.
When it comes to enforcing payment, this type of reinforcement works. If you do decide to implement late fees, be transparent about them to avoid creating conflict with your customers.
5. Automate Reminders
Don’t let your busy schedule interrupt cash-flow. Automating invoice reminders will save you a little bit of time and a lot of cognitive stress. It completely eliminates the mental clutter—“Has [customer] paid? When did I follow-up last? It is time to follow-up again?”—associated with collecting payments.
Automate reminders before and after the due date
Don’t wait until an invoice is 45 or 60 days past the payment date before setting up an automatic payment reminder. Like with the initial invoice, the likelihood of collecting old invoices decreases over time.
QuickBooks Online makes it easy to send past-due reminders in less than 30 seconds. In addition to sending invoices the day a job is complete, past-due reminders should also be sent promptly, right as the invoice becomes past due.
6. Incentivize Early or On-time Payments
Encourage on-time payments by providing incentives for clients. You don’t need to offer freebies or discounts to make people feel great about working with you. Think of these incentives as a way of offering a thank you to customers who make payment a priority.
Early payment perks
Positive reinforcement is a good strategy to offer to customers who pay early. Offer a 1 to 2 percent discount for those who pay within the “early” time frame window. For example, you could offer “2/10 net 30,” which means that payment is due within 30 days, but if payment is made within 10 days, the client will receive a 2 percent discount.
Send handwritten “thank you” notes
Every time a project is finished and paid for, spend five minutes writing a quick “thank you” note to the customer. This personal touch helps establish a good rapport between your business and your customers. Think of it as a receipt—a meaningful conclusion to the work you’ve done together.
Late and unpaid invoices create a lot friction in small business—there’s just no way around that fact. But putting a few simple systems like these in place can greatly reduce the time spent chasing customers and get revenue in your bank account more quickly.
Set your business up for success by leveraging the expertise of our trusted Aberdare Business Solutions advisers. For more information or a business evaluation please call our office at 281.599.3380 or email email@example.com.
Social Security – The Social Security wage base increases in 2017 to $127,200, up $8,700 from 2016’s cap. The Social Security tax rate on employers and employees remains at 6.2%. The employer’s share of Medicare tax stays at 1.45% of all pay. The employees’ share is 1.45% too, but they also pay the 0.9% Medicare surtax on wages that exceed $200,000 for singles and $250,000 for married couples. This extra levy doesn’t hit employers. Self-employeds are also subject to the surtax.
Social Security recipients see a tiny 0.3% hike in their benefits in 2017. The earnings test limits head up, too. Individuals who turn 66 in 2017 do not lose any benefits if they earn $44,880 or less before they reach that age. People who are age 62 through 65 by the end of 2017 can make up to $16,920 before they lose any benefits. There is no earnings cap once a beneficiary turns 66. The amount needed to qualify for coverage climbs to $1,300 a quarter. So earning $5,200 anytime during 2017 will net the full four quarters of coverage.For questions pertaining to your social security withholding or taxable earnings contact the professionals at Aberdare Business Solutions. You can reach us Monday through Friday at 281-599-3380 or send us an email at firstname.lastname@example.org
Can you rely on IRS’s frequently asked questions as legal authority? Generally, no the agency says privately.
There are some exceptions, such as in cases where the FAQ’s have been published in the Internal Revenue Bulletin, or when the Service otherwise indicates that the items constitute formal authority and can be used to sustain a legal position.
Otherwise, they are informal guidance, similar to statements found in IRS publications and private letter rulings. If you need IRS review of findings or additional explanations of IRS rules and regulations please contact the professionals at Aberdare Business Solutions. We are available to assist in making sense of the IRS paperwork and making sure you understand notices that you may be recieving. Call us today at 281-599-3380.
Here are a few tips to nurture your common sense:
Dealing with Disasters – With hurricane season approaching, think about disaster preparedness. IRS has some suggestions.
· Safeguard tax records in a protected place.
· Scan important papers into electronic format and make sure to have backup copies.
· Take pictures or videos of the content of your home or business premises, and store images off-site.
Aberdare Business Solutions has an updated RECORDS RETENTION GUIDE. If you would like one sent to you please contact the professionals in our office and we will be happy to mail or email one for your business and personal records. Call Us Today!! 281-599-3380.
Social Security Numbers and Employee Name Reporting Errors
When there is a mismatch in the employee name and/or Social Security number (SSN) as reported on Forms/N-2, compared to records at the Social Security Administration, the wage information reported with the mismatched name posted to suspense, any employee with a non-matching SSN on Form W-2 will lost benefits to which he or she is entitled.
In the case of information returns, such as Form 1099-MISC, under present rules the employer can establish “reasonable cause” for failure to match names and tax identification numbers (TINS), by presenting a properly completed From W-9 (Request for Taxpayer Identification Number and Certification). However, employers do you have an equivalent document to prove due diligence for Form W-2 reporting. Form W4 (Employee’s Withholding Allowance Certificate) has been suggested for this purpose, but there is no current requirement that every employee must file Form W-4 with the employer.
Under the Internal Revenue Code, the penalty for reporting invalid SSN’s on Form W-2 without reasonable cause, may be imposed if the number of incorrectly reported SSN’s for a tax year exceeds the greater of 1- or 0.5% of the information returns required to be filed. The maximum penalty under Code section 6722 is $50 for each incorrect payee statement, up to a maximum aggregate penalty of $100,000 per filer for the tax year.
“Reasonable Cause” Had Been Clarified As An Employer Defense
Employers penalized for putting an incorrect SSN on a Form W-2 are now helped by a seemingly more lenient IRS view of “reasonable cause,” based on the employee’s failure to provide a correct SSN. Specifically, the IRS requires only three things for the “reasonable cause” defense to apply:
· that the employer received an SSN from the employee
· that the employer relied on that number in good faith, entering it into its payroll records and putting it on the employee’s Form W-2; and
· that the employer later received a penalty notice from the IRS notifying the employer that the employee’s SSN was incorrect
In practical terms, the IRS says, “reasonable care” by the employer, justifying waiver by the IRS of the penalty, could work as follows. The employer would have to show that it made an initial request for the employee’s SSN, normally done routinely when the employee begins working for the employers; and that the employer indeed received the SSN from the employee, usually on Form W-4. The employer would not be required to make a further solicitation for the employee’s SSN unless the IRS notifies the employer that the employee’s SSN is incorrect, for example by means of a penalty notice. An employer which receives such a notice may be required to make up to two annual requests after receiving the notice.
If you need assistance with matters relating to 1099's or W2 Social Security Match issues please contact the professionals at Aberdare Business Solutions at email@example.com or 281.599.3380,
Tax Laws Small Business Owners Should Know About
When it comes to taxes, there is no such thing as being over prepared. Unfortunately for busy small business owners, keeping up with the rapidly changing federal and state tax laws can feel like a burden. However, it's crucial to pay attention to your tax responsibilities in order to maximize deductions and prevent liability problems in the future. Whether you hire an outside agency or have an internal accountant helping sort out your finances, here are four important things for small business owners to know about federal income taxes in 2017.
1.) Affordable Care Act: Any business owner who is defined as an applicable large employer (ALE), under the Employer Shared Responsibility Provision (ESR) of the Affordable Care Act (ACA), must include a detailed reporting of healthcare coverage. Businesses with fewer than 50 full-time equivalent employees are exempt from penalties (also known as the Employer Shared Responsibility Payment or "Play or Pay" penalty) faced by larger employers that do not offer coverage. Additionally, you may be eligible for the Small Business Health Care Tax Credit if you cover at least 50% of your full-time employee's premium costs and you have fewer than 25 full-time equivalent employees.
2.) Bonus Depreciation: Under the PATH act, bonus depreciations will expire in 2020. Bonus depreciations are a tax break that allow businesses to deduct 50% of the costs for new capital equipment, such as hardware or software, when it is purchased. However, the percentage will be decreased each year until it expires. In 2017, the deduction will remain at 50%. In 2018, it will be decreased to 40%, and in 2019, it will be decreased to 30%. It may be in your business' best interest to invest in new equipment this year to take advantage of this deduction.
3.) Work Opportunity Tax Credit: The Work Opportunity Tax Credit incentivizes employers to hire certain target individuals, including military veterans, who have been out of work for 27 weeks or more. Through the PATH Act, this credit has been extended through 2019. Eligible businesses can receive up to 40% of qualified first year wages up to $6,000 through this credit.
4.) R&D Tax Credit: A change through the PATH ACT gives businesses that make less than $50 million annually and invest heavily in research the opportunity to offset the R&D credit against the alternative minimum tax (AMT). Businesses that specialize in areas like construction, software, aerospace subcontracting, bio-tech, and manufacturing can leverage this if they have engineers, scientists or product development employees on staff. Section 121(c) of the PATH Act also adds a new section to IRC 41 stating that qualified small businesses will be able to elect to use part of the current-year credit, all of the current-year credit, or even a carryforward credit against payroll tax. This will allow smaller businesses that may not have a lot of regular income tax liability to still take advantage of the R&D credit benefit.
Save yourself time and stress this tax season by working with our trusted Aberdare Business Solutions advisers. For more information or a business evaluation please call our office at 281.599.3380 or email firstname.lastname@example.org
Even though we are mid way through the tax year, it never hurts to just brush up on a few of the 2017 tax changes for the year and see if they impact you. This gives you 6 months to make any adjustments necessary, to bring you to a good place by the end of the year.
****The Social Security wage base increases in 2017 to $127,200, up $8,700 from 2016’s cap . The Social Security tax rate on employers and employees remains at 6.2%. The employer’s share of Medicare tax stays at 1.45% of all pay. The employees share is 1.45%, too, but they also pay the 0.9% Medicare surtax on wages that exceed $200,000 for singles and $250,000 for married couples. This extra levy doesn’t hit employers. Self-employeds are also subject to the surtax.
Social Security recipients see a tiny 0.3% hike in their benefits in 2017. The earnings test limits head up, too. Individuals who turn 66 in 2017 do not lose any benefits if they earn $44,880 or less before they reach that age. People who are age 62 through 65 by the end of 2017 can make up to $16,920 before they lose any benefits. There is no earnings cap once a beneficiary turns 66. The amount needed to qualify for coverage climbs to $1,300 a quarter. So earning $5,200 anytime during 2017 will net the full four quarters of coverage.
**** Businesses that hire the long-term unemployed get a tax credit . The work opportunity tax credit is expanded to cover employers that hire people who’ve been out of work for 27 weeks or more and received unemployment benefits. The 40% credit on the first $6,000 in wages applies for those beginning work after 2015.
**** The 2017 standard mileage rate for business driving falls to 53 -1/2 cent a mile, a 0.5 cent drop . The rate decreases to 17 cent a mile for travel for medical purposes and job-related moves. But the rate for charitable driving remains at 14cent per mile.
If you have questions or would like to arrange a meeting to see how these changes impact your business please do not hesitate to contact our office to set up a meeting or conference call with one of our professionals. Aberdare Business Solutions 281.599.3380
Combating payroll tax fraud is a high priority for IRS and the Justice Dept. Department Of Justice is pursuing an increasing number of civil injunctions against businesses, and their officers, that have repeatedly failed to deposit taxes withheld from workers.
These serial offenders must timely pay their employment taxes and notify the Service after making payroll deposits. They can’t transfer assets or establish a new business until the bill is fully paid. There are more criminal prosecutions of willful violators, too.
If you need assistance processing your payroll or calcuating your payroll taxes contact the payroll professionals at Aberdare Business Solutions, where are ready to assist. 281.599.3380