Some business never get the money they are owed. And yet, some seem to have no problem getting paid on time. What is their secret? A good invoicing system. Here are 9 invoicing tips that has helped countless small business owners and will help you maximize your cash flow as well.
1. First, Set Payment Terms
The first thing you should do before sending any invoice is to set exact payment terms with your customer. That will prevent any awkward situations to arise once the time to pay is at hand.
Consistency is the key here. If you can, send the client an estimate (in writing) to let him know how long the work will take and how much it will cost. Once the work is done, send the invoice. Of course, the invoice and the estimate won’t be exactly the same, but they shouldn’t differ by a too large margin. You don’t want to surprise the client with a cost you haven’t mentioned before.
2. Don’t Wait to Send an Invoice
Get into the habit of invoicing as soon as the work is complete. That way, your customer will have less chance to “forget” about you. Think about it. If someone does something nice for you, how long do you actually remember to “return the favor”? Those kinds of things unfortunately tend to slip from our minds pretty fast. Don’t let your work slip from the customer’s mind either.
3. Make Sure You’re Invoicing the Right Person
Let’s say your company provides content writing services for a big client. In that case, you’ll probably be working the most with the marketing department. Should you be sending your invoices to the head of Marketing? Probably not as he has other things to do (Marketing related, you know). Maybe your invoice gets buried under a ton of papers or maybe they don’t have the authority to sign at all. Be sure to ask who will be handling the invoices before you start sending them. That way, you won’t have to go back-and-forth with the client asking them when your invoice will be paid.
4. Number Every Invoice
Numbering invoices is a good way to easily refer to them at a later date and track payments. Most invoicing software will automatically number your invoices, so you should already be covered. However, here’s the trick. If you just started using an invoicing software, the numbering will naturally start with #001. That may not be such a good thing, since the clients may perceive you as lacking experience. To avoid this, start with a higher number.
5. Set Payment Terms that Best Suit Your Business
It’s best if you send invoices with an actual due payment date. That way, the customer will know by which date they need to pay and can act accordingly. “Payment upon receipt” doesn’t tell much. When did the customer receive it?
Also, you should probably refrain from the standard 30 day arrangement and instead use one that suit your business more. Maybe you’re in a fast-moving industry where you need to have a fast cash flow to keep your business running and 30 days is too much.
6. Don’t Forgive Late Payments
One of the biggest questions is what to do with customers who are late with payment? Sure, you can stop working with them, but if they are bringing you a nice business, why would you? Well, for those kinds of “forgetful” customers, you need to set an interest on late payments.
Make it crystal clear that you will charge the customer a late payment fee (an exact number, rather than a percentage) if they are late with payment.
7. Use an Invoicing Software
Gone are the days when you could type an invoice on a piece of paper and send it to the customer. And it’s a good thing they’re gone too, because using an invoice software makes things much easier for both you and your customer. There are plenty of professional invoicing tools out there, but so make sure to check this article to find the Top 5 Invoicing Software for Small Businesses and Startups.
8. Get Someone to Help with Invoices
When you’re just starting a new business, you’ll probably be doing the invoicing yourself. But as your business hopefully grows and more customers keep coming, there will naturally be other things to keep you busy. In that situation, it get very easy to screw up on the paperwork, send an invoice to the wrong client or just not have the time to play debt collector (and trust me, you’ll have to do it once in a while). Or maybe you’re just not the sort of person to ask people for their money. Whatever may be the case, hire someone, either in-house or remote to handle your invoices for you.
9. Remain in Communication with Customers After They Pay the Invoice
This is one thing that many business owners forget to do and it is costing them a lot of future business. You shouldn’t end the communication with the customer immediately once you get paid. The least you can do is send them a thank you note, letting them know you appreciate doing business with them. You’ll be surprised how much this means to people and how much repeat business it will net you.
There you go. 9 invoicing tips every small business owner should keep in mind if they want a healthy cash flow and a good rapport with customers. If you know of any other invoicing tips, please share them with us in the comments below and don’t forget to sign up for a free Purchase Order Plus trial.