Cash flow is the lifeblood to a business.
That’s why any business owner needs to develop an effective and successful cash flow management system to make sure that the business stays afloat. While invoicing and follow up may be daunting at times, it goes without saying that it is very imperative in day to day running of the business. To make sure you get paid on time, increase your cash flow and avoid unnecessary expenses, here are 5 secrets to successful invoicing that you should know.
1. Use A Contract
The key to a successful long-term invoicing strategy is to clearly define your expectations from the word GO. Don’t hesitate to use a contact because most of your clients will expect it. By making your clients aware of all the key deliverables and payment terms from the start, you will effectively avoid any form of misunderstandings later. Ensure that your contract takes care of your late payment policies and that the client is well aware of the consequences.
2. Choose Your Invoice Language Wisely
The words you use particularly at the bottom of the invoice go a long way in determining how quickly you get paid. Research has shown that the payment terms and phrasing on an invoice lead to faster payments. Here are some of the things you need to consider:
- Be polite: Simple phrases like “Thank you for doing business with us. Kindly pay within…” increases payment chances by 5 percent.
- Use plain and clear English: Avoid ambiguity and by so doing the invoice is easier to understand thus more effective. Avoid jargons like “Net30” but instead use simple terms like “30 days."
- Apply late payment fees: Mentioning the interest charged on late payments would increase the chances that the invoice will be paid much faster.
3. Invoice Early And Often
The sooner you invoice your clients, the sooner you get paid needs no emphasis. Each time you’re due a payment, usually on deliverables, invoice the client no matter how busy you are. Remember that your business greatly depends on getting paid, so be strict about sending invoices. If you’re invoicing for partial payments, ensure that it is clearly indicated on the invoice to avoid any misunderstandings.
4. Follow Up On Outstanding Payments
Ideally, it would take a few minutes or days to have an invoice paid thereby eliminating the need for any follow up. However invoices can take up to 21 days to get paid; and could affect your cash flow. For that reason, you should have a follow-up and collection systems in place.
While a phone call, an e-mail or an automated reminder may remind the client of an outstanding payment, it’s only reasonable that you keep sending reminders at least once every week until the payment is made.
5. Take Legal Action As Necessary
Sometimes you may be left with no option but to seek legal redress especially when the client ignores your polite reminders. Cease doing business with the client while seeking payments for the hard work you have already invested in. When the situation is beyond repair, small claims court is an option you can use to claim your payments. Sometimes a strong worded letter from a lawyer may be enough to secure a speedy response.
By developing a strong relationship with the client and outlining potential issues early enough, you can greatly increase your chances of getting paid promptly. These 5 tips to successful invoicing will ensure you spend less time chasing down payments but instead focus on the growth of your business.
Automated Invoicing Tools or Apps for Small Businesses
Here are some of the best-automated invoicing tools and apps for small businesses that will help make your invoicing more effective.
- BillingTracker Pro – This app which is designed to automate the invoicing process and track cash flow accepts foreign mailing address and deals with foreign currencies as well providing the best solution for foreign clients.
- kBilling – This is an invoicing package that comes with an easy to use interface, customizable invoice templates and also allows you to append extra information to an invoice if you have a client with special requirements.
- FreshBooks – This in the cloud online invoicing and time tracking service that saves time. Users can accept payment with PayPal and Authorize.Net and invoices can be mailed or emailed. In addition, set it up to automatically send invoices and late payment notices.