by Meredith Wood of Fundera
After marketing your services to a new customer, performing a job to the best of your ability, and taking steps to deliver the best possible customer experience, there is nothing worse than waiting, and waiting, and waiting to get paid.
Unfortunately, accounts receivables delays are a reality that plagues a lot of businesses, stalling cash flow and creating often debilitating financial hardship for small businesses.
Effective invoicing of clients and customers gets your small business paid faster and helps keep your cash flow in the black. Try these 9 tips to reach maximum invoicing efficiency with minimum hassle.
1. Be Clear
Spell out for your client exactly where and to whom they should send payment, in what form, and when it is due. The more explicit you are about how and when you expect payment, the less confusion on the part of the client, and the quicker your business is likely to see a check. Make it as easy as possible for your client to send payment through the correct channels and to contact you with any concerns.
Address your invoice to the correct contact person at your client’s company (with all address details). Again, the more specific you are, the more likely you’ll get a quick turnaround on payment. You don’t want your invoice languishing, neglected, on the wrong person’s desk for weeks.
2. Itemize, Itemize, Itemize
Make sure you and your client are both clear on exactly what services or goods they are paying for and at what rate by itemizing your invoice. Confusion or haggling over fine points of billing just slows down the payment process. So make the individual costs of goods delivered explicitly clear both before the transaction takes place and within the invoice.
3. Use a Tracking System
Help your client and your own business keep an easy-to-follow paper trail by identifying invoices consistently. Consecutive number identifiers are most common, although you can also use letters or a mix of the two—but stick to your system once you’ve chosen it. With a consistent tracking system, it will be much quicker for you or a client to pull up a specific invoice. You’ll also have an easier time keeping payments straight when it comes time to file taxes.
4. Shorten Your Payment Period
Let’s be realistic: some of your clients will be late making payments. A typical payment period is 30 days. If a client’s payment doesn’t arrive until two weeks after this 30-day deadline, you’re waiting for payment for a full six weeks. But if you set a relatively short term for payment—say, two weeks—and a client pays two weeks late, you’re looking at a month to receive a check. And if your client is on time (or even early!), the turnaround is that much shorter.
5. Be Polite, But Firm
Nobody likes to receive an invoice. Make the transaction a little less painful by keeping language polite and professional. Ask your client to “please pay by ____” and genuinely thank them for their business. Send a thank-you note or even a small discount or reward to clients who consistently pay early. Provide contact information for any questions or feedback.
Send reminders to your client if payment isn’t immediately forthcoming: one about a week before the payment deadline, one the day of, and a follow-up once a week until payment is made. If you find that payments are frequently late across your clientele, consider adding a deposit requirement or late fees for late payments, and then enforce these consequences.
6. Make Your Invoices Stand Out Visually
Big companies are handling a lot of invoices. Make sure yours doesn’t get lost in the crowd. Display your company logo prominently on your invoice, and make other key information—like the total payment amount and the due date—stand out on the invoice document.
7. Send Invoices Promptly
Perhaps the most important part of the invoicing process for getting timely payments: send invoices immediately after services are completed or goods are delivered. A delay on your end is a needless delay in receiving payment. And if you’re prompt with your invoicing, it will encourage the client to be prompt as well.
8. Automate Invoicing
Use an accounting program such as QuickBooks to automate the process. That way you no longer have to manually enter billing information, which is a time-sink and prone to costly mistakes.
Invoicing programs can also quickly generate very professional-looking invoices and send automatic reminders. Or you can skip the print invoices altogether and invoice digitally. A streamlined process for invoicing and following up is especially important during your company’s busy times.
9. Offer Online Payments
As technology continues to drive our world, more and more individuals deal with their finances almost entirely online. Some consumers don’t even have a checkbook anymore. If you’re not offering online payments, you are dramatically slowing down the time it takes to get paid by your customers. Offer online credit card transactions on your website, or set up a simple business PayPal account to allow customers to pay online.
Invoicing isn’t fun for anyone; it can be time-consuming and occasionally uncomfortable. But with these tips you’ll be able to streamline your process and shorten your timeline for receiving payment on the goods and services you’ve rendered.
Meredith Wood is the Editor-in-Chief at Fundera, an online marketplace for small business loans that matches business owners with the best funding providers for their business. Prior to Fundera, Meredith was the CCO at Funding Gates. Meredith is a resident Finance Advisor on American Express OPEN Forum and an avid business writer. Her advice consistently appears on such sites as Yahoo!, Fox Business, Amex OPEN, AllBusiness, and many more. Meredith is also the Senior Financial and B2B Correspondent for AlleyWire.