5 ways to streamline your invoicing process and get paid faster
“Poor cash flow is the biggest killer of startups.”
— Sir Richard Branson, Dr. Yes at Virgin
And Sir Branson would be right. U.S. Bank found 82 percent of all small businesses failed due to poor cash flow management. The team at Fundbox broke this down further by analyzing more than 39 million invoices from the past 12 months, and the results were staggering.
On average, each small business has $84,000 in unpaid invoices. The trickle-down effect cannot be overstated. That’s money to take on new and bigger projects, hire more employees, and purchase new equipment.
So here are some ways to keep your cash flow in the green so you can focus on growing your business instead.
1. Make invoices easy to pay
The rule of thumb here is simple. Create a path of the least resistance for the person who’s trying to give you money. Variety is key, whether it’s in the form of credit cards, e-payments, or good ol’ paper checks.
If your business takes you to your customers, set up ways to accept payments on site. Rude? We think not! If you’re expected to pay on-the-spot for a shirt or a toaster, why not for the display shelf you just built for your client?
2. Timing really is everything
Yes, you’re at the mercy of a client’s payment cycle, but that doesn’t mean there aren’t ways to expedite things. Find out what each client’s accounts payable cycle is and time your invoices accordingly, to minimize delay or interruptions.
And not all days are created equally. Some will say it’s best to send invoices over weekends when your customers aren’t bogged down by daily operations to sort out their finances. Others argue it’s best to send invoices on the first working day of the week so there’s plenty of time to facilitate all that’s needed to make payments possible. To this we say, every organization is different, so get to know your customers for best results.
3. Incentivize and penalize
Consider offering a discount to customers who pay early or on time. It’s a win-win for you (get paid sooner) and your customers (pay less). But be sure to have the early payment discount and conditions in writing to avoid disagreements on the start date.
Net 30 is the most common payment term. This indicates when the expected payment on the invoice is due. In the case of Net 30, it means your customers have 30 days to pay you for work done.
Similarly, implement an incremental penalty system for overdue invoices, and be firm when it’s time for execution. Be sure to check with your state’s usury laws and make exceptions sparingly.
4. Get in touch with the right people
Make sure invoices go directly to the person in charge and copy his or her team to avoid invoices being lost or forgotten. Don’t send invoices to your contact or supervisor in the organization and expect it to be forwarded. It can reflect poorly on your intent to get paid and can prevent you from using the necessary verbiage to express the importance of getting paid in a timely manner. And be sure to have a built-in collections process for follow up — also known as stalking your customers until they pay.
5. Use the right tools
If you’re not already paperless, we strongly urge you to be. From preparation and scheduling to emailing and invoice management, so much of the invoicing process can be automated. And when you automate, all the needed information is available when you need to generate an invoice.
Next, use software solutions that integrate with one another. If you have to track labor costs for billing, your time tracking solution should work as one with your accounting or payroll software so that data can migrate seamlessly. Your accounting software should then be able to track outstanding invoices and send reminders within the specified periods.
All this will help ease the dunning process for your business and your customers. Taking out the human element also reduces error and delay, which are things the invoicing process needs no further help from.
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