Did you know that more than 64% of small businesses have invoices that are more than 60 days old? According to a Wall Street Journal survey, more than half of your entrepreneurial peers are chasing down unpaid invoices. The same survey showed that 20% are experiencing increasing problems with slow or non-paying clients.
While you don’t have control over late-payers, you do have control over your invoicing practices. By “fixing” some of these internal processes and communications, you can get the cash flow “into” your business a lot faster.
Stay cash positive with these adjustments to your invoicing process.
1. Offering Credit? Check References.
If you offer clients credit without checking their references, you’re putting your business in a risky cash flow situation. By investigating their payment histories through a credit application, you can avoid companies that have experienced payment issues with others. Dun and Bradstreet and Experian both offer business credit reports that can give your company insight into clients who are looking for large credit accounts. If there are some warning signs, you can always require a deposit.
2. Make Your Terms Extremely Clear
While a lot of companies rely on “Due Upon Receipt” to get their invoices paid faster, your clients are going to process your invoices on their own time table unless you give them one. Make your payment policies a part of your letter of engagement, proposal or contract at the start of your business together. In the “terms” section of the agreement, stipulate that invoices are due within 14, 30 or 45 days. Pick a timeframe and stick with it for consistency so your clients know what to expect and you can gain some control over your cash flow.
3. Be Flexible With Clients’ Preferences.
Your payment terms should be clear and consistent – but when it comes to the other information on the invoice, be flexible to your clients’ preferences. During your onboarding phase, ask your clients about the information they require on invoices – like purchase order numbers, responsible team members, etc. You should also ask about how services or goods need to be represented on the invoice – do they need an itemized list or will a final total work? Finding out about and adapting to these preferences will help you get through their billing processes smoother, which results in faster payment for you.
4. Bill on Time – Every Time!
It’s amazing how many small business owners drag their feet on invoicing. Getting paid (fast) starts with having a simple system for invoicing – one that helps convert time tracking to invoicing (which makes invoicing easy, by the way). When you’re scrambling at the end of the month to send invoices, it’s a waste of your time and it keeps your invoicing at a lower priority than it needs to be. Get on top of your invoices and send them out on a regular basis. For monthly projects, pick a date for invoicing and stick with it (like the 5th of every month, for example). If you bill on time, your clients are more likely to pay you on time.
5. Follow up Regularly With Your Clients.
Your job isn’t done when you send out the invoices! With a reliable system, you can keep track of which invoices are overdue and then send regular reminders. After all the prep work that goes into making terms clear and establishing a system for invoicing, this is where (unfortunately) a lot of small business drop the ball. Make sure you select an invoicing system that reminds you when invoices are overdue. This way you can easily reach out with a reminder – it’s not pushy, it’s just business.
Small businesses don’t have to take the short end of the stick when it comes to cash flow. Perfect your invoicing process and policies so you can get paid on time.
Mike Savory – Customer advocate and automation engineer
I operate at the intersection between technology and ease of use. I strive to make our customers’ lives easier through elegantly automating manual processes. Much of my time is spent listening to small business owners, making sure to bring their voice to the table in everything I do. My free time is spent with my kids, which includes being a Cub Scout leader for an energetic group of 10-year-olds where I’m lobbying for a Software Product Management badge.