Billing and invoicing can be a tough task for a new business. Once you've delivered work, it's time to get paid, but there is no guarantee you'll receive payment on time. Sending out invoices and following up on them is a tedious task, but it's a necessary one.
However, there are a few things you can do to increase your chances of getting paid quickly. The faster you get paid, the better you can project cash flow and budget for costs. Here are 4 tips that will help you create an efficient invoicing process.
Set Expectations And Terms Early
Before you begin working on a contract, take the time to set expectations about the scope of work and the billing method. It's best to offer different billing methods such as hourly billing, project billing, or monthly billing.
No matter the billing method, you should always negotiate a fee and have it approved in writing. Tie your compensation to the scope of the work so that there are no issues in the future when it comes to charging additional amounts or overtime in case of scope creep.
Set billing increments for such situations in advance so that everyone understands the terms involved. When setting deadlines, tie them to the project's scope to avoid confusion about deliverables. Notify your client that you offer them multiple ways to pay.
Thanks to the growth of digital payment channels, setting up multiple payment sources isn't difficult. It's also helpful to communicate the time frames within which you expected to get paid and any penalties you'll charge in case of late payment.
Offer Early Payment Discounts
When negotiating payment terms, it's helpful to offer early payment discounts if your industry experiences lengthy credit cycles. For example, if your clients usually pay you on a Net30 basis, offering them a 10% discount if they pay you within 7 days is a great incentive.
Payables departments are always looking to take advantage of early payment discounts since this increases their company's bottom line. When companies review the efficiency of their AP processes, the amount of early payment discounts captured is an important metric.
Thus, by offering these discounts, you're giving your clients a powerful incentive to pay you early. Tailor your prices so that the early payment doesn't reduce your cash flow significantly.
Another factor to consider is the timing of your invoices. Most businesses send their invoices on a weekday and this can lead to them being ignored for a week. Send them over the weekend so that they're addressed early during the workweek.
If you bill your clients monthly, send them an invoice on the first of each month so that it lands right on top of their monthly priority list.
Avoid Mistakes
Errors on your invoice cost you more time than you can imagine. Not only does it cost you time to fix those errors, but it also pushes your expected payment date out further.
Some of the common errors new businesses make is entering incorrect information such as wrong vendor names, invoice items, rates, and taxes charged. Avoid all of these issues by using receipt templates for service providers.
By using templates, you'll have to fill in order-related information and enter amounts and this reduces your scope of error. In addition to these items, consider adding payment terms to your invoice templates.
Research conducted by Due shows that companies who added payment terms to their invoices and receipts were more than 1.5 times likely to get paid on time. Make sure your company logo is on the invoice as well since this increases your chances of getting paid on time by 3 times.
Use The Right Software
The right software can make invoicing and collecting payments a hassle-free process. Choose software that offers you multiple access points, whether on desktop or mobile. Business is increasingly conducted everywhere, so make sure their mobile app closely matches their desktop version.
Good invoicing software also allows you to track payments and disputes easily. It's best to connect invoices to Client Relationship Management (CRM) software so that you receive a complete picture for every client.
If a client's payment is past due, then consider setting up automated reminders so that you can skip unpleasant collection calls. Most software providers allow you to send reminders via email as well as SMS these days.
Check the payment methods that the software allows you to leverage. Offering clients the ability to pay with a single click increases your chances of getting paid on time for the bills you send out.
A Top Priority
Most businesses view invoicing and payment collection as clerical tasks that are necessary evils. However, make it a priority for your business, and you'll notice that your clients will treat paying you as a priority as well.
These 4 tips will help you collect payments on time with greater frequency. Get paid faster and focus on what matters: Your business.
