Invoicing is the bane of many a small business owners’ existence. Operating a small business effectively, particularly in the early days, places huge demands on your time. Naturally, your priorities are the core activities that make your business tick and keep your customers coming back for more.
As a result, invoicing is often left to evenings and weekends, sometimes long after products have been delivered and services have been fulfilled. This is a dangerous practice. With the consequences of insufficient cash-flow potentially so dire, it’s essential you put a process in place to make sure invoices are sent out quickly that make it as easy as possible for customers to pay.
But what is invoicing best practice? Here’s our guide…
Do your due diligence
Before you agree to work with new clients and customers, you should always take the time to do some research and carry out the necessary credit checks. Is it a new company? If it is, take a look at the Companies House register to make sure there is not a stream of failed businesses in the business owner’s name. You should also speak to industry peers about the organisation and ask the business for the details of an existing or previous supplier that you can contact for a reference.
Agree payment terms with the customer
You should always specify exactly when payments must be made. Standard terms in the UK require payment in 30 days, but some clients may agree to shorter periods such as a week or 10 days. You should create terms and conditions which include the agreed payment term and detail any interest or overdue fees you’ll charge if payments are late. This will set expectations for both you and the client.
Keep it simple
When it comes to creating an invoice, keep the layout simple and uncluttered and only include details that are essential to the payment. The faster the client can find the information they need, the more quickly you’re likely to be paid.
Your invoice should include a logo, billing address, contact details, a brief description of the product or service, the acceptable payment methods and the cost. There should also be a section that includes your payment terms and conditions. Here are some professional invoice designs for inspiration.
Provide a number of payment methods
Giving your clients more ways to pay is an effective way to speed up a payment. The extra options will put the client in control of the payment type and help them regulate their own cash-flow. BACS, credit card, direct debit and PayPal are just a few of the payment types you should consider.
Send invoices immediately and to the right person
Don’t wait until two weeks after services have been rendered to send off an invoice. Routine is the best way to make sure things are not missed in the process of running your business. Creating an invoicing schedule, such as sending invoices on the same day every week, ensures customers know what to expect and keeps cash flowing into the company. It also shows that you are professional and value promptness.
It’s important you send the invoice to the right person as failing to do so can lead to payment delays. If you’re not sure who to send the invoice to, it’s always worth giving the client a quick call.
Keep a track of your invoices
For a small business with just a handful of clients, setting up a simple spreadsheet may be enough to keep up with unpaid invoices. However, as the company grows, you’ll find it’s much easier and less time consuming to use an invoice tracker system, which is often included as part of a cloud accounting package. This will collate all the invoice information in one place and provide alerts when payments are due.
Make invoicing a central part of your strategy
It might feel like a time-consuming and mindless task, but invoicing should be considered a central part of your business strategy. Without employing best practice and putting a process in place, you’ll struggle to maintain the level of cash your business needs to thrive and grow.
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