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Invoicing is the lifeblood of any small business, because how else can you expect to get paid? Without smart, effective invoicing, your company can’t hope to succeed. You need to know what payments you’re still waiting on, which have hit the bank account, and how to invoice in a manner that makes it easy for clients to pay on time.
Effective invoicing can make all the difference in the world to your success as a business owner, and luckily, it’s not rocket surgery. Effective invoicing is actually really simple. Follow these five tips to master invoicing and watch your small business grow as a result.
1) Use a standardized template
Without a standardized invoicing template, discrepancies could crop up in your invoices over time. Every invoice needs to look the same, and contain the same relevant information: your business address, email, phone number, website, fax number, and company logo, for a start. It should also include the name and contact info of the party being invoiced.
A good invoicing template gives the party being invoiced all the details they need to make payment, and to do so on time. A great invoicing template also includes information about credit terms, discounts for early payment, and penalties for late payment. All of this will encourage your customers to pay their bills in a timely manner.
2) Send invoices on time
It can be too easy to forget to send an invoice, especially when you’ve got a lot on your plate already. But the one thing you should never do is forget to send your invoices on time. You can’t expect to receive your payments if you don’t invoice for them in a timely manner.
You should send invoices as soon as the debt is incurred – if possible, hand it to the customer at the time of the transaction. Maybe they’ll pay then and there! Even if they don’t, the grace period for paying an invoice can’t start until you’ve sent the invoice. The longer you delay sending it, the longer you’ll have to wait for payment. If you give a customer 30 days to pay an invoice and don’t send it for 15 days after the services are rendered, you’re effectively giving them a grace period of 45 days – and delays like that can add up to significant cash flow problems if they become habitual.
3) Automate the process with invoicing software
If you have problems with managing invoices, the solution is to automate the process with invoice management software. Invoice management software is a good idea even if your company is still very small, because your invoice management will become more unwieldy as the company grows, and you need to be prepared. Of course, implementing a software solution early on will help ensure that your company does grow.
In addition to helping you keep track of what invoices are outstanding and what payments you’ve received, invoicing software is also a great way to handle complicated invoicing problems, such as those that arise from billing different projects at different rates. The software will be able to calculate invoicing discrepancies that arise between projects as a result of different materials, methods, longer or shorter billed hours, or discounts applied to each specific project. You’ll also get access to historical invoicing data, as well as real-time payment data.
4) Set short payment terms
The shorter your time frame for payment, the faster you can expect to get paid. Most business owners choose payment terms of 30 days or less, but you’re free to set your payment terms at whatever length of time you like. You can request payment within a week, within two weeks, within 60 days, or even at the time of services rendered. In fact, the latter may be your best bet for getting prompt payment.
The average debtor pays two weeks late, so make sure to factor that extra time into your cash flow projections, and consider it when setting payment terms. Set payment terms at no longer than 13 days if you want to get paid within 30 days. Use online invoicing to get payments faster and make paying simpler for your customers.
5) Number your invoices
Numbering your invoices is essential to keeping track of payments for tax purposes. There’s no single invoice numbering system that’s the best; create one that works for you, using sequential numbers. You can even use a combination of numbers and letters to number each invoice. You can start on whatever number you want, and it might be best to start at a higher number – starting with number, say, 112 makes you look more established than starting with number 001.
Proper invoicing is the key to getting paid on time. As long as cash keeps flowing in, you can keep growing your small business – and these invoicing tips can help you make it happen.
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