You know the old saying that time is money, right? Well, when it comes to invoicing, this couldn’t be more true.
Prompt and regular invoicing ensures prompt and regular payment from your clients. And there’s no better way to increase cash flow than by making sure you get paid on time. But if you’re struggling with how best to manage your company’s invoicing process, never fear — we’ve got some tips for you.
In this post, we’re going to share some of the best ways you can optimize your invoicing process for maximum efficiency. So, if you want to learn how to avoid payment bottlenecks and delays, then read on.
Table of Contents
Research Clients’ Credit and Payment History
Before doing business with new clients, you want to ensure they’re a good fit for your company. And the best way to do this is by checking their credit score and payment history.
Encouraging prompt payment from clients is a delicate balance between being too demanding and too lax. No one likes an aggressive creditor, but no one wants an overly relaxed approach either.
So, the key here is to try and strike a balance between protecting your business’ interests and maintaining cordial and productive relationships with your customers. To help make this easier, understand what kind of payment behavior different types of clients tend towards:
Late Payers
These are clients who have poor or nonexistent records at paying bills on time.
It’s not uncommon for companies in B2B transactions to deal with late payers on occasion. Late payments can lead to severe cash flow problems. So, if a client is known for being late with their payments, you may want to decline to do business with them.
Late or No Payers
This kind of behavior is common among new clients and those who have recently undergone major financial setbacks.
With the former, it’s likely that they’re still working through some kinks in their payment process and could improve over time. With the latter, however, there’s a reasonable chance that they never will back. That means you’ll be stuck dealing with them as a late or no payer.
Late Payers Becoming Payers
These customers have been paying late, but they could return to the good graces of prompt payment behavior.
Depending on how much business you do with these clients, it may make sense to work out some sort of arrangement — for example, offering them discounts if they agree to pre-pay for a future order. In any case, consider your risk tolerance when deciding whether to continue working with these kinds of clients.
Early and Prompt Payers
When vetting new clients, try and find those who have this type of payment history. These are businesses that are quick to handle their financial obligations. As a result, they allow you to focus more of your attention on your core business.
While it can be tempting to accept any order from any client, make sure you put some time into vetting these potential customers first. The best way of avoiding payment bottlenecks is by not getting stuck dealing with late payers in the first place.
Invoice Immediately After a Sale
Once you’ve made a sale, the next step is to head straight to your invoice payment software and create one. You can also do this using pen and paper if you’re just getting started with invoicing or have an older business that isn’t as tech-savvy, but moving to software for invoicing is a must for error-free invoicing. As it is important to get it done right away.
By treating each invoice as a bill, you’ll be able to ensure it gets paid on time — which should lead to consistent payments from clients moving forward. And given how critical payment timeliness is for cash flow, this will save you buckets of time down the line by keeping you out of payment limbo.
Establish Clear Terms of Payment
Once you’ve created your invoices, the next step is to communicate when it’s due. For example, if you allow 30 days for a client to pay an invoice, be sure they know this ahead of time.
Also, make sure your terms are clearly stated on all business forms and marketing materials — including things like contracts and purchase orders. This will help prevent ill-advised promises from slipping through the cracks.
Establish Clear Late Fee Policies
Besides informing clients when an invoice is due, ensure they know what happens if — and when — they delay their payment.
While you may not intend to charge late fees, it’s better to say something upfront rather than leave them guessing. If you decide to charge a small fee (or no fee at all), explain these terms on your invoices.
If these policies aren’t clear from the start, your client may not understand the importance of timely payments. And if they fail to pay as promised, it may be difficult to collect any late payment fees without raising ire.
Consider Upgrading Your Invoice Software
Once you’ve established clear terms of payment and gotten into the habit of immediately issuing invoices after each sale, you can start taking your payment process to the next level.
One of the easiest ways to do this is by switching from pen and paper invoicing to a more modern invoice processing platform like Avii Workspace. This could be using an app like Freshbooks or developing your custom system.
The main thing is that software applications are quick, easy to use, and designed for small businesses. For example, many applications offer clients a free trial — so there’s no excuse not to at least try them out.
Review Your Invoice Frequently
Even if you’re using automated invoice processing software, your invoice is something to check often. And there are several reasons why this is important.
One, it’s easy for things to get lost in the shuffle if you don’t check your invoices every week or two.
In addition, it helps to check your cash flow forecast each month by monitoring your ongoing business activities. By doing so, you’ll know exactly how much money is coming into the company several months in advance.
Finally, reviewing invoices often ensures that clients are paying on time. This is critical if you want to ensure a steady cash flow into your business.
Make Collection Calls When Necessary
As you read in the introduction, one of the worst things you can do as a small business owner is wait for clients to pay. This will only lead to late payments that damage your cash flow. If this happens, don’t be afraid to take matters into your own hands by making collection calls.
You should never have to do this if you’ve established clear payment terms upfront and sent out invoices immediately after each sale. But that doesn’t mean it’s never okay to call your customers — especially when they’re purposely not paying their bills on time.
For example, if a client is late with monthly or quarterly payments — even though they promised otherwise — then it’s time to pick up the phone and call them about the matter.
This is especially true if you’re on a tight cash flow and need to know how much money will be coming in next month. By calling, you can make sure payments will be made as expected.
Make Your Invoices Stand Out
Whether you like it or not, clients have hundreds of invoices crossing their desks each day. So your invoice needs to pop out from the rest — otherwise, you risk getting buried under an avalanche of paperwork.
How do you ensure this doesn’t happen? Here are some ways to do that:
Use a Practical Invoice Layout
Include a company logo or mascot on every page of your invoice so clients instantly know it’s from you.
Make sure all contact information is clear, concise, and easy to find. This could include a mailing address, email address, and phone number.
Personalize It (Slightly)
While you want your invoice to look as professional as possible, you don’t want to go overboard. Stick to relevant details like your client’s name, the amount owed, and payment terms. Make sure all contact details are correct too.
And don’t forget to sign it.
Use the Right Fonts
Using the correct font can significantly differentiate your invoices from those of your competitors. For example, you might want to choose crisp and clear sans serif fonts like Helvetica or Arial. Why? Well, because these are easier to read than others.
Have a Document Trail
The last thing you want is to lose out on an invoice payment because of a bottleneck in the document trail. So consider implementing a system that makes it easy for everyone involved — from client to bookkeeper and accountant to marketing manager — to refer to older invoices.
In addition, when it comes to tracking older invoices, consider keeping electronic records. This makes retrieving old information a doddle and avoids costly delays if someone misplaces the original paper.
Business Invoicing Process Simplified
Invoicing process is a necessary evil that all businesses must face. When you handle them in the right way, they ensure timely payments and help you keep track of the financial health of your business.
However, many small business owners make the mistake of focusing on other areas instead of invoicing. This can lead to financial issues further down the line — so it’s important to stay vigilant with this aspect of your business.
Remember, some clients don’t owe you money out of the goodness of their hearts. So invoice them often and make sure they’re paying on time.
For more informative content, keep reading our posts.