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Invoicing is the bane of many small business owners’ lives. You do the work – that’s the easy part – but then it’s several weeks before you get the chance to fire off the invoice and, before you know it, you’re struggling for cash flow. But it doesn’t have to be like that. Here are five tips to streamline your invoicing process and keep the money flowing in.
How to improve your business’s invoicing process
If you have an outdated, unreliable or otherwise imperfect invoicing process, then these simple steps – from using invoicing software for small businesses to offering a range of payment options – will help you get paid on time.
1. Invest in invoicing software
Most small businesses’ budgets are tight, but a relatively small investment that can save you time and improve the financial health of your business has to be worth it. Invoicing software is the perfect example of this.
This software makes the whole invoicing process paperless. You can send professional invoices to your customers using any device and check their status at any time. Invoicing software can also give you a snapshot of the financial health of your business, so you can see everything from the value of invoices that are overdue to your expenses, sales and even the money in your bank accounts – all on one simple dashboard.
2. Explain your payment terms clearly
One common mistake small business owners make is failing to clearly explain their payment terms before taking an order from a new customer. When you agree to do business with someone new, you should always make it clear when you expect a payment, how payment should be made and the steps you will take if a payment is not made on time. That should include charging late payment fees and debt recovery costs, which every small business is legally entitled to do if another business is late paying for goods or services.
As well as explaining your payment terms clearly by email or over the phone, you should also include them on every invoice so there can be no excuses when a payment is not made on time.
3. Write up your invoices correctly
One of the leading causes of small business payment delays are invoices that are not written up correctly in the first instance. Everything from incorrect dates to using the wrong company name (e.g., a trading name rather than a registered name) can cause delays. In many cases, rather than coming back to you and pointing out a mistake, the customer will sit on the invoice and fail to make the payment by the due date.
When creating an invoice, make sure you include all the following details:
- An invoice reference number
- The customer’s full details including their address
- Your legal business name and contact details
- The current date and a payment due date
- The payment terms
- An itemised list of the products/services supplied and their cost
- The total amount due and VAT, if applicable
- Your payment details
You must also mark the document clearly as ‘invoice’ and check with the customer which department or individual you should send the invoice to.
4. Think about when you send your invoices
You might create and send your invoices whenever you get a spare 10 minutes, but research suggests that there are certain times that you can send invoices to generate faster payments. Analysis of more than 300,000 invoices by Vistr found that:
- The best time to send weekly or fortnightly invoices is on the weekend.
- The best time to send monthly invoices is on the first day of the month.
Whenever you decide to send out customer invoices, make sure it’s very quickly after you have completed a project or delivered a product or service. That will help to keep a regular flow of cash coming into the business as well as reinforcing your professionalism.
5. Offer a range of payment methods
The easier it is for a customer to make a payment, the more quickly you’re likely to get paid. Therefore, it’s well worth giving your customers as many different payment options as you can, such as credit card, debit card, bank transfer and online payment. As well as speeding up payments, offering more payment methods can also help you attract new customers and even do business overseas.
With so much else vying for a smaller business owner’s time, efficient invoicing can often be overlooked. However, if you can’t get the money that you are owed into your business quickly, then even thriving firms can fail. That’s why it’s so important to take a few simple steps to improve your invoicing process now, before it’s too late.
You may also like: Factoring Invoices: An Excellent Financing Option For Small Businesses
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