Invoicing can often seem like a small task in the otherwise big, busy field known as small business.
Small business owners generally have a lot on their plate and they need to have all the best resources available to ensure they fulfill their responsibilities efficiently.
One of these is in making sure that they have the appropriate cash flowing in to meet their financial obligations. Although you may not realize it, cash flow is often more important in the long run than profit, because you need positive cash flow to pay your bills.
And in order to get cash coming into your business regularly, you’ll need your invoices to be paid on time, every time.
That’s why today we’ll look at 7 important things you should do to make sure your invoicing becomes a success.
Get your policies in place
The first and most important thing is to make sure that all your customers are on board with your payment policies.
The only way to effectively and efficiently do that is by setting payment policies that you will get all your customers to see and sign off on.
These policies are particularly important during those unfortunate times when your customers are unwilling to pay for one reason or another.
This will then act as a document you can reference to help clear up the confusion. In your policies you should include:
- whether you will require the customer to pay upfront
- how much time you will allow for the invoice to be paid
- whether there will be a late fee
- what types of payments you’ll accept (cash, card, PayPal, bank transfer, etc.)
By getting these things out on paper, you’ll be able to avoid those situations and help improve your invoicing.
Quote each job
One of the most important business lessons is to always get it in writing, no matter what ‘it’ is. Normally, this ‘it’ involves money; therefore, some sort of agreement between you and your customer.
Before you agree to take on a job or provide products for your customer, you should have your agreement and expectations clearly written down. The payment policies above are great for general payment matters, but when it comes to specifics, you’ll need a quote (or quotation).
This will show the customer what you’re providing, for how much, and in what time frame. More specifically, you need to answer these three important questions on your quote:
- What are your and your customer’s expectations?
- What is the time frame for you to deliver the goods or services?
- What, in detail, are the services you’ll be providing?
When you get these out, you’ll help to avoid arguments and scope creep, when the client expects more and more for the same amount of money.
Your invoicing can get a huge boost by simply going with the times. Increasingly, people are automating as many of their daily processes as they can.
While you may be quite comfortable with the many great invoicing templates available, there is a way to make invoicing even faster.
You can start using online invoicing software, which is custom-made for simplicity and small business owners. For example, because the software is online, there’s no downloads as everything takes place on the cloud.
All your clients’ information is saved there, so you can invoice wherever you want. This will help you save time and money.
Don’t use “Payable upon receipt”
One of the great problems with modern businesses is that they still use the same terms, phrases and behaviors of the older times.
A long time (but not too long) ago, businesses would put at the bottom of their invoices the phrase, “Payable upon receipt.” While it is understood that the customer should pay the invoice as soon as possible, to the customer nowadays it simple means: “Pay whenever you feel like it.”
That will not be good for your invoicing.
Instead, you should include a specific due date for your invoices. The common one is 30 days, although this is becoming increasingly archaic. Even better is to put it at 15 days.
With the normal 30-day due date, you’ll get the common problem of small businesses having to wait 72 days on average for payment.
Instead, with 15 days you’ll cut that time down considerably.
Invoice as soon as possible
One of the most important parts of your invoicing processes is to actually get started on your invoicing process as soon as possible.
This is logical, but for many small business owners, they are often so busy that they simply forget about it. But that’s usually because they put if off for another day when they are less busy.
Instead, you need to send out your invoices as soon as you’ve completed the job or delivered the goods.
Even better, you should create your invoice and fill in the general data before you’ve even completed the job. That way, you can just fill in the specifics when everything’s been completed.
Send polite reminders
Every small business owner has the unfortunate experience of a customer who just doesn’t pay on time. Even worse, he pays much, much later than is acceptable and doesn’t have great communication skills.
In that situation, and in every situation, it is important to send out polite email reminders. You should be sending these out as soon as the invoice is past due, in fact.
But politeness here is important. Studies have shown that by simply using polite language (such as “thank you for your business”) you can increase the speed and rate at which your invoices are paid.
Make follow-up phone calls
Sometimes it comes to the point where your customer is simply not answering your emails. If you’ve sent polite email reminders, and if your customer has received it, this normally warrants further action.
However, before you start lawyering up, you should place a phone call to find out if there are any problems on that side.
Placing a phone call is different from sending an email. The biggest difference is that there is no delay or “I’ll get back to it later” with phone calls. You are talking in real time, and the client has to answer in real time.
Of course, it should be polite, as all your communications with your customers should be.
These are the 7 best things you should commit to doing on a regular basis in order to ensure that your invoicing is improved considerably.
With your invoices getting paid faster, you’ll have more cash flow and greater opportunities to grow your business.