Don’t Let Invoicing Run Your Business
Professionalism isn’t just about being good at the services you provide or the support you offer to customers. You can’t ignore the need for professionalism in how you handle your finances, either, especially when interfacing with customers. A lot of new and small business owners don’t approach invoicing like professionals. This means that often they don’t get paid when they expect to and their cash flow is irregular and hard to keep control of. Sometimes this is the customer’s fault, but sometimes it’s the fault of the one doing the invoicing. Whatever the reason, you can’t risk not having the money you’re owed, so here are a few ways to tackle the issues.
Keep It Consistent, Keep It Professional
If you’re recreating invoices from scratch every time you send one out, then you’re making a mistake. You make room for human error to poke in its head time and time again. You might be getting some of the crucial details that customers need wrong and preventing them from actually being able to make a payment. Similarly, if the format of your invoices doesn’t fit some of the most common design conventions, then customers might actually not recognize them as invoices. With poorly design invoices, it’s easy to think that they might as well just be a document confirming agreed-upon pricing. Nowadays, there are plenty of software packages that make it much easier to use a simple, professional looking template. They can also help you create a record of past invoices sent, which we will highlight the usefulness of in a point further down the article.
Make Your Policy Clear
Above, we went into how invoices can occasionally be mistaken for pricing documents. If you’re not sending out documents confirming your pricing details before you do the work and attempt to invoice your client, then you should. You might have had a conversation, phone call, or email chain with the client describing pricing and services offered beforehand. However, it’s a good idea just to put the nail in them by sending a formal list of prices on the services they’ve requested before you start the work. That way, you can ensure that they’re fully aware of the costs that will be appearing on the invoice. It also ensures that they understand your policy on how and when you expect to receive payment for any work done. If things get contentious later on, then this pricing email or letter can create a paper trail that shows your justification for how much you include in the invoice.
Keep It Transparent
The relationship between you and your client can obviously change between sending those confirmed prices and sending the invoice, of course. You might very well have provided extra services on request. If that’s the case, then make sure you confirm with the client that any extra services are going to come with extra charges on the invoice. Then when you send the invoice, try to make every cost as transparent as possible. Every service, every piece of equipment or material you need to compensate the cost of, and so on. Otherwise, your numbers might seem nebulous and unjustified to your client. They might not understand where a rise in the price has come from and attempt to argue about it. Again, ensure your pricing method is kept transparent as well. Are they paying for the whole service at once or are they paying on a per hour basis?
Make Sure You’re Not Missing Any Information
Some people have different requirements for what they consider essential information on an invoice. If its absence shows any potential barrier to you receiving payment as prompt as possible, then include it. Legal information is crucial, including a unique invoice number, VAT considerations, business name, address, and contact details. The date you provided any of services and the date you send the invoice should be kept separate, as well. Even if you’ve already taken the time to inform them of payment details, do it again. If you’re sending electronic invoices, you can even make the step of payment easier for them. For instance, if you’re using a service like PayPal, you can include a link in the invoice itself for clients to click and take them right to the payment method.
Have As Much As You Should Have
Regardless of how clear you make your invoicing policies, billing details, and so on, you are still likely to have a problem at some point. Not all customers are as reliable as they should be when it comes to payment. If you’re dealing with particularly big orders, this can become a real danger to your business. You might lack the funding to pay for the materials and tools you need to do your next big job. To that end, you should know how to acquire the funding that can help you fill that gap and have as much cash as you expect to have after finishing a job. Spot factoring solutions from teams like Business Factors can ensure that you’re not left in the lurch by a late payment. You don’t have to slow the business right down, you don’t have to consider downsizing your operations temporarily and you can put that money into the supply and growth operations that it should be contributing to. Find the invoice financing option that works best for you and your relationship with clients.
Know How Much You Need
Knowing when to rely on those financing options is just as important as knowing that they’re an option. There might be some periods of the business year when you can, indeed, be a little more relaxed and afford your clients some more room to pay what they owe. But a lot of businesses run on a seasonal model and there will just as likely be lean periods where they need to keep hold of every penny that they can. If your business looks like it fits those models, then you have to start figuring out your seasonal cash flow. Top billing software, or as you grow hiring an accountancy firm to act as your finance hub manager, can help you to stay on track and project future expenses more accurately. This can help you find the lean months and know when spot factoring is going to be a solution worth considering more seriously.
Don’t Be Afraid To Put Your Foot Down
You shouldn’t just rely on financing to cover late payments, either. You care about the relationship with clients and you don’t want to jeopardize it by appearing rude. However, you should consider the fact that unless there’s a simple explanation, they are the ones being rude by neglecting to pay what they owe. If the due date of the invoice is approaching, don’t be afraid to send them a gentle, polite reminder. Then don’t be afraid to send another if they fail to meet the date. Keep things civil and don’t let your tone become accusatory. Some clients may very well have a valid explanation. But that doesn’t mean you should just continue to assume and wonder while waiting for your payment.
Pick Better Clients To Invoice
It’s acceptable to tolerate late payments once or twice. However, if you have a lot of repeat business with a client that is continuously late, then you have to consider whether they’re a client worth keeping on. If they’re repeatedly endangering the finances of the business, you have to consider cutting them off. There comes a time when you have to prioritize clients and really consider which are worth the cash that they offer. Late payments are just a factor, so you should create business performance KPIs and see how much they really contribute towards the goals that you’re trying to reach. All these factors can come together and help you really judge a client by how much it’s worth being as flexible as you are to them. Sometimes, you will find that it’s time to walk away and prioritize clients that are more profitable and more reliable.
Your invoices can trip up your finances in more ways than just preventing your cash from coming when you really need them. If you fail to properly organise those invoices, they can get you in trouble when tax season comes as well. Organising your invoices is a huge part of bookkeeping. This is one of the reasons that you create unique and individual number codes for every invoice. It’s also why you should consider making more than one copy of them, just as you should have more than one copy of all applicable financial records. At least one digital copy and one paper copy should be at hand at any moment. That way, if one copy is lost due to fire damage or data corruption, you have the other as a backup. If, like me, you don’t have a natural inclination for bookkeeping and are busy running your business, then a Company like Cosgrove & Cosgrove are a great solution.
Whether it’s ensuring that you’ve provided all the details you need, being more selective of customers, or ensuring you always have the money you should, you need to get on top of your invoicing. Funding methods like spot factoring, organizational tools, and better invoice design are the three cores of an invoicing system you can rely on.