Invoicing Must Do's - What You Need To Know
Collecting invoices is a time consuming, laborious process.
It’s even harder when you have a client that doesn’t pay.
If you’re like most startups or small to mid-size businesses, you’ve probably been guilty at one time or another of procrastinating when it comes to invoicing your customers.
In this article, we look at invoicing must do’s and tell you what you need to know to ensure you get paid consistently and on time.
Invoicing is Top Priority
We encourage you to put invoicing at the top of your priority list. Don’t leave it until you actually “need” the money.
Having a good money collection system is a must have for your business. You need the money to pay your employees, your suppliers, yourself and your business expenses.
Invoicing doesn’t have to be hard, though. You just have to follow a system to make it work for you. Here are your must do’s:
Set Payment Terms
Decide whether you’ll offer net-30 payment terms, something shorter or something longer.
You don’t have to wait 30 days for payment if you don’t want to. You can specify that your customers pay on receipt of your invoice. If you provide work in a timely fashion, it should be okay for them to pay you when you invoice them.
When offering net-30 terms, you want to first check your customer’s credit.. By reviewing these reports, you’ll learn whether or not your customer has a good payment history. If they don’t, it’s not a good idea to offer net-30 credit terms.
On the flip side, if they have a good credit track record, you can give them a little leeway.
Whichever way you choose, be sure your customer’s payment terms are in writing and agreed to by both parties.
Use a Contract
Save yourself a lot of headaches when invoicing and have a contract between your company and your customer. Outline the following: • Deliverables • Time frames • Conflict resolution • Payment terms, due dates, expectations and consequences for late payment
Charge Overdue Fees
There are consequences for a customer’s late payment. Outline this in your contract.
It’s emotionally hard, though, for many companies to charge this overdue fee, but it must be done.
If you’ve clearly specified your payment terms, you have every right to charge them interest on their overdue invoices.
Track Your Time Accurately
If you are billing hourly for your time, it pays to track time accurately.
Use a professional software to do this so you can quickly print reports for your customers if they ask.
Time tracked on a computer is much easier to provide than random slips of paper with your time worked.
Send Invoices Promptly
So you did the work two months ago, but you’re just now invoicing? This is a bad idea.
If you delivered the promised items or services months ago to your client, he’s going to be quite surprised to get a bill a long time after the work was finished.
As a general rule, invoice right after the work is done or the product is delivered.
Customers are more apt to pay a timely invoice than a tardy one.
If you’ve followed the previous must do’s of invoicing, and the payment is late, it’s a good idea to follow up.
Follow up once your invoice is five days past due. You can email or call your customer and find out if they have any problems or didn’t receive the invoice.
If there aren’t any issues, gently remind them the invoice is overdue. Set another date.
If they miss that one, try again. After this, if they don’t pay, it’s probably time to get collections involved.
In all of your dealings, remain professional and courteous. Anger won’t get you anywhere.
To encourage on-time payments, you can consider offering discounts for pre-payments or early payments. For example, offer your customers a 2-5% discount for pre-paying their invoice. Lower it just a bit if they pay within one week of invoicing after the product is delivered. This not only helps your ongoing cash flow needs, but it can help ensure your customers pay on time.
Now that you have a list of invoicing must do’s, you can feel confident in your invoicing system.
The best way to get paid on time is to send out your invoices once or twice per month, on the same day each month.
Additionally, only work with clients or customers who have a good track record of paying on time. There’s not much reason to keep a customer around who doesn’t pay you in a timely fashion.
If you have a client that falters in his payments, do reach out with a friendly reminder. If that doesn’t work, do you have to quit working with them?
Not necessarily. You can offer them payment in advance options or payment before delivery.
As a final thought, always remember that your products and services matter, and you have a right to be paid consistently and on time.
What are your invoicing tricks? How do you get your customers to pay you on time? Please share your comments below. We’d love to hear them.