Cash Flow- Billing/Invoicing
Congrats! You’ve made a sale. When do you send the bill? Many small businesses struggle with being timely about invoicing often forgetting or not adding complete information on the invoice. It’s confusing to the customer and will lead to non-payment. Nothing influences positive cash flow like your billing process.
There are several ways to ensure prompt payment. Here are our favorites:
- Timeliness. Stick to a schedule of sending out your invoices, but don’t wait too long. This seems like common sense but if you have 30 day terms and wait 30 days after delivery to send the invoice, then you may not get paid for a total of 60 days after you shipped the product. Can you wait 60 days? Try to send the invoice immediately when the product is shipped, even if the customer prepaid for the order. If you are a consulting or service practice, like us, you might send a monthly invoice- but be consistent. Your customer should be used to paying you the same day every month or week.
- Make it Easy. Make it easy for your customer to pay you by giving options clearly marked on the invoice. If I have to search for a link or payment address, I’m more apt to throw your bill in a pile and pay it “later”.
- Clearly label all important information. This means the customer can clearly identify the bill to and ship to addresses, as well as the origin of product and order. The customer should also have access to shipping and delivery information related to the order- UPS/FedEx tracking numbers. Lastly, the invoice should clearly state quantities, per unit cost, and description of product/services. Leave no questions to chance, as the slightest misprint will cost you time and money.
- Know who is tax-exempt. This one’s a killer for billing and receivables departments. Your system should have a way to determine sales tax exemption along with a filing system for you to track the types of organizations which are exempt. Failure to remove tax from an invoice for a non-profit, church, or municipality will almost guarantee non-payment until corrected and they aren’t going to tell you it’s wrong until you call.
- Send a monthly statement. Additional to invoicing, you should send a monthly statement if you’re carrying receivables. It’s another reminder to your client, and it allows them to reconcile their records. It ensures that any invoices you’ve sent and they haven’t paid are still in fact outstanding.
- Implement a system. If financially able, put in place an automated billing system which would ensure that your bills go out on time. We can help identify some good ones.
Do you want to get paid on time? Send a bill. It’s the only way your customer can (and should) pay. Don’t be afraid to ask for payment early, maybe even at the time of order. If you can’t do that, then don’t wait or it’ll hurt later.