Small business owners in a number of industries use invoicing to get paid. If you’re among them, be aware effective invoice strategies are critical to your success and can help you improve your cash flow.
First, don’t send invoices with incorrect information because clients may refuse to pay them. Don’t fail to keep detailed records so to avoid mistakes. Second, avoid delayed invoicing, meaning do your best to send invoices as soon as you can after the service is rendered. Otherwise, clients will just ignore the bill. Third, avoid late payments. The point is that clients will pay late if they know they can.
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Now, let’s see what you need to know about effective invoicing:
- Discuss Your Terms and Conditions Beforehand
Establish clear terms and conditions before starting any work. Your T&Cs should answer these questions:
- Will any upfront payments be required? If yes, how much?
- When (what date?) (how many days?) is the payment expected after the invoice has been issued?
- Will late fees be charged as a specific amount or a percentage of the invoice total?
- Will incentives for early payments be offered?
- What types of payments are acceptable for you?
- Use Timely Invoicing and Early Payment Incentives
Send invoices to your clients on time. Being late increases the chances of not being paid. Also, you may want to offer incentives for paying early.
- Shorten Your Payment Terms
If you’re running a service-based business, demand 7-day payment terms. The only exception is when you work with an enterprise-level business or government agency, which have their established payment policies.
- Send Invoice Reminders
It’s important to have an automated invoicing process that will enable you to send reminders anytime a bill is unpaid for a certain period of time.
- Have Easy Payment Options
Make it easy for clients to make payments. If it’s easier for them to mail a check, consider accepting checks.
- Know the Best Time and Frequency to Bill Clients
Know your client’s pay cycle so to avoid a long lapse of time between sending an invoice and getting paid.
- Avoid Holding Credit for Clients
If you have to pay another supplier, vendor, or freelancer in advance, the client must be responsible to pay for that job upfront. At the very least, consider requesting a deposit that will cover this expense.
Use invoicing software to automate as many invoicing tasks as possible so not to waste time on constantly entering information like contact details, job descriptions, and prices. Automation also includes recurring invoicing, expense tracking, and sending out payment reminders.
No one can deny the negative impact ineffective invoicing can have on your cash flow. That’s why you should avoid invoicing errors that will affect your cash flow.