An invoice is an important document sent across by the seller to the buyer informing him or her regarding the purchases made and the amount due. Invoicing is an important activity for any firm, as no one wants outstanding debt for months. It can affect the working capital of the firm and can create a cash crunch.
Efficient invoicing is the key to rapid debt collection. Here are some invoicing tips for small businesses to help them recover money faster:
- A perfect invoicing template: A big problem small businesses face is that their invoices are not standardized and don’t follow a set pattern. This leads to discrepancies among the invoices generated over a period of time. Therefore, the first thing to do is to have invoice template with all the relevant information such as the company logo, business address, contact details, website, email address, fax number etc. Basically your customer should have all the details needed to make the payment. Thus, you give the customer no reason to delay payments. Moreover, it is a fantastic idea to include credit terms and details for late payments or discounts available for early payments. This will motivate the client to pay on time!
- Sending invoices on time: When the team is small and most employees have multiple roles, it is easy to forget sending out invoices. This is perhaps the biggest mistake all small businesses make. Forgetting to send out invoices is a sin. If you don’t send invoices, you can’t receive payments. Moreover, the credit period begins from the day the invoice is issued. Thus, if you delay in invoicing, you extend your credit period. This will lead to a definite cash crunch. Therefore, it is a great idea to have your other departments work closely with the accounting or finance teams so that invoices can be made accurately and on time.
- Utilise mobile billing devices: If you have a sales force conducting door-to-door sales, don’t delay your payments by postponing billing process to the head office. Instead, equip your sales team with tablets, which are connected to your main invoice generating software so that they can create invoices on the go. This way reduce the turnaround time of billing cycles and improve the communication between the accounts and sales departments.
- Online payment options: Consumers these days love to make payments on the go. Instead of just sending invoices in the post, make them available on email. With an e-bill, the customer will be able to make the outstanding payment through a few clicks. Payments through credit card, debit card and Paypal just add to the convenience factor. We had tremendous feedback on this article : save money using online invoicing software.
- Plan for debt collection: There will always be customers who will not pay on time and will have outstanding bills for months. With the help of invoicing software any firm can schedule reminders for outstanding payments. These reminders can be set for regular intervals and can be sent automatically until the payments are processed. Also, assign a team member to follow up on call with these debtors. If needed, add a late payment fees or blacklist the customer who defaults payments. This will ensure that minimal outstanding debts turn into bad debts.
- Find a software solution: Today your firm may be small and the process of debt collection may be relatively irrelevant. But as the firm grows, managing multiple customers can get complicated. Therefore, investing early in a software solution is a great idea. Moreover, if your billing differentiates per project depending upon the billing hours, rate of input materials, discount allowed etc. It is better to leave the calculations to the software. There are many invoicing / billing software available in the market and you can select the one, which suits your firm’s requirements. Furthermore, a software solution will be able to store historical data as well as give you real time data with regards to payments made to your bank account. However, now a days low priced & effective business accounting software (like profitbooks, releezee, zipbooks etc.) are used more for both invoicing & accounting purpose.
It is customary for clients to take firms for granted especially if they are start-ups or small businesses. Hence, to ensure regular payments, a strict invoicing policy needs to be in place & the above-mentioned strategies should be deployed to guarantee payments from clients.