Invoicing is an essential part of every business. At the end of every project or order, you generate an invoice and bill the client. Good invoice management is how you maintain a steady stream of revenue that will support the business and its future projects.
Unfortunately, invoicing is not always as easy as it seems. There are certain standards to meet. On top of that, not all clients will pay the invoices they receive on time. Good invoice management is essential and we are going to talk about some of the top tips for better, more effective invoicing in this article.
Start Early with a Checklist
The first and most important thing to keep in mind if you want to make invoice management easy is to start early; as early as when you receive the project. During the initial account setup process, make sure you collect all the essential details about the client. These details include:
• The name of the account
• Telephone numbers
• The address of the business – important for bank statements and invoices
• Tax identification numbers
• The personal details of a contact or a representative for the client
Keep the information catalogued and make sure you can recover it easily. It is also important to maintain an up-to-date database, so be sure to make updates and adjustments whenever necessary.
Automate Your Billing Process
If you’re still relying on manual invoices – especially if you’re using electronic typewriters to create multiple invoices – now is the perfect time to start automating the process. A variety of software and online tools are available that will help you create, bill, organize and keep track of your invoices. You can even start right away and create a free invoice for your next client.
Combined with the database of information we talked about earlier, automating the whole billing and invoicing process is easy. You no longer have to maintain everything manually, which means you can avoid some of the most common invoicing mistakes without a problem.
Automating your billing process will also help you save time and money. Invoices can be sent digitally or printed out for delivery. Reminders will be sent periodically, so there is no need to contact the client again and again just to check if the invoice has been received. Some systems even support automatic invoice tracking, so you’ll know right away when payments for your invoices are cleared.
Offer Easy Payment
The more payment options you offer, the easier it will be for clients to clear your invoices. Never make clients jump through hoops just to pay for your products and services. You can offer direct deposit and take advantage of an ACH service to make accepting client payments easier. Accepting paper checks is also a good idea, although you have to be extra careful with them.
Credit cards are also among the payment methods you should accept, even when most of your clients are businesses. It is not uncommon for businesses to use credit cards to make smaller payments. Accepting credit card payments means you can get your invoice cleared that much faster.
Don’t forget to consider alternative payment methods too. PayPal, for example, is a great alternative for receiving online payments, even from overseas clients. The same can be said for Bitcoins, but make sure you check local regulations before deciding to add these payment methods to your invoicing system.
Get Invoices Cleared Faster with Incentives
Last but not least, take active steps towards getting your invoices paid sooner. You can do this by offering incentives and discounts to clients who choose to clear the invoice early. For starters, you can offer a small discount – usually around 2.5% or less – for early invoice payments. You can add the extra discount as a cost factor, so you’re not eating into your profit margin when clients choose to pay early.
You can also speed up the invoicing process. Thanks to the automated systems we talked about earlier, you can send an invoice as soon as a sale is made or a project is completed. Sending an invoice a day earlier will actually reduce your Accounts Payable Days ratio by a substantial amount.
Last but not least, charge interest or late fees to clients who miss their payment deadlines. It is not uncommon for businesses to charge a late fee. Simply make sure the fees are explained at the beginning of the project – along with any other payment terms you have – so that clients know what they’re facing when they choose to pay the invoice past its due date. Combined with automatic reminders, you can look forward to a healthier cash flow.
