No matter what kind of business activities you conduct or how big your company is, the basic principles of business always remain the same: pay and get paid in time. But running a successful business is a very sensitive process revolving around many elements, so the moment something goes wrong it can take down a business faster than a speeding bullet. Even seemingly mundane tasks like invoicing has to be taken seriously if you want to stay afloat, but with a little finesse the whole process can be improved to such extent you might be wondering: “why haven’t I thought of this earlier?”
Before Anything Else: Go Online
If you haven’t made the bold move to cloud accounting yet, it’s worth considering as soon as possible. An online accounting solution not only reduces the time it takes to create invoices to seconds, but it also stores all other necessary data in the same place, putting your expenses, inventory items, business reports, and more all in the same place. And did we mention that almost every process is partially or fully automated?
The Steps to Improved Invoicing
Although every business owner can develop their own methods for improving the invoicing process, we collected together certain steps with which chasing money won’t cause such a problem anymore.
It might seem obvious, but the more professional your invoice appears, the better the chances that you will be taken seriously. Although certain accounting programs allow you to fully customize your invoices (e.g. FreshBooks), you shouldn’t send them out without:
- Client’s full name and address
- Invoice date and reference number
- The invoice’s issuer
- Total in the relevant currency
- Due date
- Payment methods
- Cost details
- Terms and conditions
And speaking of details, a key element of successful invoicing is to have accurate record of the work you have done for the client: this means materials used, the time spent on a project, expense notes, and additional items that might be important to invoice. This way the client will clearly see what has to be paid for, just like when you receive your bill at a grocery store with every item listed on it.
The Sooner the Better
Send the invoice to your customer the moment you close out a project or deliver a service or product. This is beneficial for two reasons: the client will get duly notified that they owe you and you won’t have to worry about whether you will be paid or not months later or when it’s time to file your business reports.
You have to be very specific when defining payment terms. First and foremost the invoice has to be crystal clear about the available payment methods you want to be paid in. Tip: if your accounting software allows fast online payment for invoices (see QuickBooks Online, for example), turn it on; it increases chances of getting paid in time significantly.
Another thing to always include on an invoice is the due date. As to how long the payment period should be is up to you, but to avoid late payments as much as possible try not to give any more than 14-30 days from the date of invoice – unless strictly necessary.
Handling Late Payments
Late payments can be reduced down to zero if the invoice can be paid immediately or, if this option doesn’t apply, cloud accounting software often contains an automated payment reminder. Xero is one of the many solutions with which you can send out automated reminders at predetermined intervals, while others like FreshBooks notify you when an invoice is still open.
If you still aren’t paid in a timely manner, chase down late payments as soon as possible, but ensure you remain polite the whole time.
Determine whether the invoice is for a one-time client or it is for a recurring customer. In the latter case, set up the invoice to be created on a monthly, quarterly, bi-annual or annual basis. If your customer would like invoices to be sent on an irregular basis, then negotiate the terms.
Like we said before, the beauty of online accounting software – or any invoicing solution for that matter – is that you can automate many mundane processes, especially in case of recurring invoices. However, even non-recurring invoicing become easier once the very first invoice is created, the client’s relevant data is entered into the system and the inventory is set up with the items you sell.