Just like everything in the world of business, it is about finding the best way to streamline your workload, which in the long run will help you grow and thrive. So here are a few tips on effective invoicing.
Agree on costs before commencing the work
It is good practice to provide a written quote for commissioned work with a brief outline of what will be carried out. Always be transparent, honest and manage expectations from the beginning which is a valuable way to build trust. Getting sign terms and conditions is recommended.
Keep daily time records
Noting everything down as you work will help speed up the invoice process. There are several time-tracking software and time-sheets available online, which will help you to record hours or days spent on a project. Keeping track of time spent will also help you keep track of budget requirements and, should it look like the project is going to cost more, you can communicate that to the client beforehand, rather than sending an inflated invoice at the end.
Get technology savvy
Cloud billing technology makes life a lot easier. There are many software packages available which can be linked up to your business bank account. With the touch of a button it allows you to see who owes you what and when, not only that, but most applications will automatically send out invoices. Reminding the client that the payment is nearly due, or that the overdue payment has not been paid is also part of the application. This is incredibly helpful and frees you up to run the rest of your business.
Set payment terms
Keep your payment terms clear, simple and stick to them. They should stipulate when payment is expected so you and your client both know where you stand. In order to retain a healthy cash flow, introduce interest on late payments and a policy so staff know how to deal with overdue invoices. Most companies send reminders, followed by phone calls before taking more official action. Incentivising early payments is a great way to encourage customers to part with their cash, while also rewarding them. Receiving money on time is important, as poor cash flow can put a company under real pressure.
Ensure that each customer has a credit limit. Check that the limit set is in line with the size of their business and yours. Where possible try to ensure that your customer profile is varied to limit your exposure to particular threats. Always ensure that no customer is allowed to exceed their credit limit even if that means losing a valuable contract. If a customer approaches their credit limit arrange a meeting to discuss any arrears and request updated accounts or other evidence to prove that they will be able to maintain payments.
Streamline your invoicing procedure
Establish a regular invoicing procedure so outstanding accounts are addressed quickly. Keeping to a billing schedule will help cash flow and your client will also be able to budget accordingly as they will know when to expect your invoice. As part of your schedule you should look to introduce an invoice tracking system. Include information such as the date you sent the invoice, who it went to and when payment is expected.
Check each invoice is correct. Lay out the details of the job in a clear and concise way to avoid any confusion which may delay payment. Ensure your bank details can be clearly found and number each invoice which will make it easier for you to track payment. If the customer uses a purchase order system ensure that you have complied with their requirements.
Hasib Howlader is director at London insolvency practitioners, Hudson Weir.