There’s a simple truism in business – the quicker you invoice, the quicker you get paid. And that’s probably one of the biggest problems that small businesses in particular face – delays in customers paying their invoices. But with a little bit of planning and some organisational financial software, you can smooth out those cashflow wrinkles that delayed invoices can cause. Here are a few tips on how to save time on your invoicing and improve your cashflow at the same time.
#1 – 14-day and 21-day payment terms
Although traditionally payment terms on invoices are pitched at 30 days, this can lead to real problems and interruptions in your company’s cashflow if those 30-day payment terms aren’t adhered to. So to make life easier and ensure that collecting on due invoices isn’t such an uphill battle, shorten your payment terms to either 14 or 21 days instead of 30. This also gives your invoices more of a sense of urgency, and can act as a mental ‘prompt’ to your customers to pay on time.
By trimming your payment terms down you’re also preventing an invoice payment ‘logjam’ at the end or beginning of each month, allowing you to spread your invoicing out and keep it to more manageable levels throughout the month.
#2 – Go paperless
The truly ‘paperless office’ is still probably a few years away, but sending out your invoices electronically can really cut down on the amount of paperwork you create every month. By using templates and integrating your invoicing with your accounting system you can produce invoices quickly and relatively painlessly that can be sent by email.
This can also make a considerable saving to your monthly postal costs and avoids the whole ‘your invoice must have got lost in the post’ excuse. However, if you are sending invoices by email then ensure that you request a confirmation of receipt email in response. This is quite easy to do via your browser – you should be able to tag a request for confirmation onto any email you send by changing your settings.
#3 – Get the right accounting software
Keeping track of money in and out can be a logistical nightmare, particularly if you are a small business or even a one-man band. By investing in some good quality accounting software like Intuit that can be easily integrated with your invoicing process as well as your monthly book-keeping can make life a great deal easier. Cutting down on the amount of time you spend both creating and chasing payment on invoices means that you have more time to dedicate to actually running and expanding your business.
#4 – Be patient…but not too patient!
We are all still going through tough economic times, and sometimes through no fault of their own a customer may be a little late paying an invoice. Rather than letting it slide, ensure that you contact them as soon as the invoice becomes overdue. The earlier you can talk to your customer, the easier it will be to find out what the problem is, and what solution will best resolve the situation for both of you. Watch out for indicators that a customer may be in financial difficulty (for example if they’ve been a good payer but suddenly start missing payments). Be patient, but not too patient – the longer you leave a situation the more difficult it will be to resolve.