Women In Business

Invoice innovations: Taking the pain out of the process

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Collecting money from clients can be a big headache for small business owners, but it’s a vital part of getting paid and staying in business.

The invoicing process is key to turning a business’s goods and services into cash. And in business, cash is king.

A sales invoice is the statement sent by you — the provider of goods and services — to the purchaser of your product. It’s the purchaser’s obligation to pay the bill, in turn creating an account receivable. It’s a document that’s basically an agreement between the buyer and seller for goods or services that must be paid within a certain amount of time.

While invoices can be a pain point for your bookkeeping and accounting staff (or you!), it’s a necessary part of recording sales transactions. Here are a few tips for making invoicing less stressful:

When to invoice & payment terms

The clock starts ticking as soon as the date is added to the invoice. It’s a reminder to you and anyone else when the payment is due. Whether you invoice before or after the project, make sure the terms of payment are clearly outlined on the invoice. It might specify something like “net 30 days” which means the entire amount is due within 30 days. Some businesses will make you pay 50 percent of the bill the same day an invoice is created with the balance due upon completion of work.

The invoice should include terms of sale that might look like this: “2/10 Net 30.” This means the client will get a 2 percent discount if payment is received within 10 days, or the entire balance is due in 30 days.

Incentivizing clients to pay on time may save you the hassle of tracking down your money and prevent lost revenue over time. No one likes to deal with unpaid invoices— you or the client.

Online business accounting software or DIY?

There’s an abundance of business invoicing software, such as Quickbooks or Freshbooks, that make it easy to automatically send out invoices as well as alert customers to pending due dates. You’re able to manage multiple clients, automating payment and setting up recurring invoices. Accounting technology is always progressing and many popular software options are only available in the cloud.

Using an online invoice generator will streamline information on each invoice, and the client will know exactly what they are paying for. The client is less likely to delay payment if there’s no mystery surrounding your services. Clients don’t like to be surprised.

Some businesses still prefer to generate the invoices themselves using an Excel spreadsheet. To get the most out of how to use the program, Excel University has tons of tricks and tips on how to set up an invoicing system and use conditional formatting tools for invoicingthat allow you to apply formats to a cell or range of cells to make it easier to organize, such as if you want to see a list of open invoices.

Penalties for late payment

If you don’t already have one, create a standardized client agreement that builds in late fees. A typical fee is 1.5 percent interest per month after the payment due date. If clients sign a contract up front, these are less likely to delay payment. They don’t want to be hounded, but if push comes to shove, you have a client agreement that specifies the terms. Unless you do have a business contract, it’s difficult to chase down the money you are owed.

If you’re the only one in the business, such as a freelancer, trying to collect money can be an overwhelming and intimidating process. You might consider hiring an accountant who is responsible for billing, organizing, tracking and analyzing your books. No matter which direction you choose, it’s ultimately up to you to do everything possible to be prepared and set yourself up for success from the get-go.

About Avery Taylor Phillips

Avery Taylor Phillips is a freelance human being with too much to say. She loves nature and examining human interactions with the world. Comment or tweet her @a_taylorian with any questions or suggestions.

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