14 Oct 9 Tips For Effective Invoicing
If you are a small or medium business, and especially if you are a recent start up, the subject of being paid is one which should be on your mind all the time.
A sale is not a sale until the money is in the bank; until that time, it’s just a nice possibility. So how can you ensure that your invoicing process is working as hard as possible to ensure that you are getting paid promptly?
Ask For Payment
Don’t be shy, the money is yours, and its owed to you. Send out an invoice as soon as you have delivered the goods or services, if not before. On the day that payment is due, or the day before, call your debtor and ask politely when payment will be made.
Know Your Client’s People
Make it your business to get to know the people in your client’s company who are responsible for paying the bills. Build a friendly relationship with them, yes, send them a card at Christmas and ask after their family. Nice people get paid first, and pretty lowly clerical workers often get to decide who are the people who are going to be paid when they are managing their own cash flow tightly.
Set Up Favorable Terms
In an analysis of over 12 million invoices, accountancy specialists Xero found that on average, invoices were paid two weeks after their due date. So, if you want payment at thirty days, then make your settlement terms 14 days.
Offer Early Settlement Discounts
This is very useful if you have well heeled clients; big companies will always try to use settlement discounts, as they are often cash rich. Beware though that they don’t pay late AND take the settlement bonus.
Make Your Invoices Clear
Make sure your invoices are very clear and easy to read. Don’t have invoices which say “To dfG5/4 chain saw”, instead have them say “1 x dfG5/4 SuperSwift Pro Chainsaw 15” Blade with Case”. Make sure individual item costs, relevant taxes, sub totals and totals are clear and easy to understand. Someone has to approve that invoice, and it’s much easier for them if the whole thing is in clear English.
Make Sure Your Invoice Is Correct
This sounds obvious, but a common tactic to delay payment is for a company to advise you at the last minute that the invoice is for seven dog kennels, and they only received six. This buys them time while you sort out the possible discrepancy.
Explain How To Pay
Right there on the invoice, list your payment methods including bank account details, Paypal details, physical address, and so on. Make life easy for the people doing the paying – they are your friends.
Get Confirmation Of Receipt
It’s the easiest thing in the world for a company to say that they didn’t receive your invoice. Send it by email as well as any other agreed method, and use a file sharing system where you can check if mail has been picked up.
Make Credit Control A Priority
Check out your credit control situation every day. Have an early warning system in place so that you can nip bad payment situations in the bud. Be tolerant with other small business; if a usually good customer hits a tough patch, and is up front in communicating with you, be prepared to work out a payment plan with him. That’s a lot better than watching him go down and not receiving a penny.