An integral part to any business, big or small is invoicing. Without generating invoices and ensuring they are paid, your cash flow could cause a few problems.
For small businesses and sole traders, having cash to pay contractors/employees/bills is fundamental. Larger businesses often have scope that they can still pay staff if they are waiting on accounts receivable. Either way, no one likes it when they are waiting on someone for money – the same goes for businesses.
Follow these tips below to ensure that the invoicing system in your business is run well.
This is a really good way of keeping track of your accounts receivable. Invoice everyone on the same day of each month and keep the invoice terms short. A common way to invoice is by asking for the invoice to be paid on or before the 20th of each month. Some send their invoices on the 21st of the month for payment by the 20th of the next month; some send their invoices at the start of each month meaning they allow 20 days for payment to be made. Sending invoices out sporadically is inefficient and can often lead to missing crucial elements. Set aside time each month to prepare and send your invoices out on time. Put it in your diary now.
Make sure you include clear payment terms
Outline these clearly on the invoice. Have a due date highlighted so there is no confusion. Having your bank account name and number in an easy to spot location on the invoice is crucial too. You don’t want to allow any confusion as to when and where your clients need to pay.
Overdue fees/Prompt payment discount
This is an effective way to encourage clients to pay the invoice on time. Pay it early and receive a discount. Pay it late and be charged an additional fee. No one likes to pay more and everyone wants to save dollars where they can, so this is a good way to encourage early or on time payment. Either a set amount or a certain %. For example, “$25 will be added to overdue accounts” “10% off total amount due if paid by XYZ”
Use accounting software to send your invoices. Talk to us – we can suggest a few practical options. Online accounting software allows you to produce and send invoices efficiently. Most allow scope for you to personalise an invoice with your logos and fonts.
If a payment date has passed and you have yet to receive funds, call your client early and call often. If the invoice is due on the 20th and no payment has been received send a friendly reminder to start with. If still unpaid, a phone call asking for payment to be made may be required. Keep on top of them, as soon as you ease the pressure, it may slip through the cracks. Accounting software can help here too. Reminders can be sent to you and at a glance you can see what money is due in and when.