When starting your own small business, invoicing plays a vital role in the life-blood of your company. It's how you make money and make an impression on your clients. It can also be one of the hardest things to keep up with. Invoicing takes practice, a rhythm. Here are 6 tips to avoid getting off schedule in creating and sending invoices as well as tracking down late-payers so you have time to focus on other aspects of running your company.
1. Make your invoices as professional as possible. If you send out handwritten scribble on invoices you’ve ordered for $.20 in bulk, some of your clients may be less inclined to pay you as promptly as other, more official looking requests for payment. Be proud of your brand; have it printed on your invoices. Make sure the amount owed is very clear and easy to understand. Be detail oriented down to the color, font and wording of the document. Be clear, plain and very official. If you feel the necessity to include legal jargon, have a lawyer help you translate what you’re trying to say in plain english.
2. Invoices are official records, so what’s on it must be correct and follow standard business practice laws. If you’re an LLC, an LLP or other limited company you must provide your business’s registered address and phone number. If you have one member or executive's name listed, you must have them all listed. Make sure your document follows all of your local and state business requirements. One of the benefits of purchasing an accounting system for your business is that all of these things can be done for you.
3. Stay organized by using invoice numbers. Secondary to the total amount due, keeping your invoices organized and easily referenceable is key. You can use a unique sequential number for each of your clients, or use a chronological method of organization where the date part of the sequence of numbers. Assigning your client with their own customer number at the beginning of the sequence gives you a secondary way of referencing a specific client’s invoice. Two examples for customer number 47 that had their first invoice on February 2, 2015 could be 0047-02022015-01 (Customer number, date, sequential number) or 0047-0001 (customer number, sequential number).
4. Choose a clear payment structure. Asking for a deposit before you begin your work, or even asking for the full payment upfront helps reduce financial risk to your business and is easier on your cash flow. There is nothing legally stopping you from requesting a payment upfront. If at the end of your services your client refuses to pay either the full or partial amount, you’ve lost your leverage to stop work until payment is complete because it’s already finished. If you’re worried about losing clients by requesting a hefty sum upfront, offer your client a satisfaction guarantee or their money back.
5. Be clear about your payment terms. Your client should be aware and understand your payment terms when initially signing a contract with you, but make sure you remind them on your invoice. Make sure your deadlines are clear on your invoices to remind your client of the importance to make a payment by that date. You should also make clear and unquestionable any late penalties or fees you plan on implementing if the payment requirement is not met.
6. Be prompt. Not only is it efficient business practice to send out invoices as soon as the work is done, but if you’re lackadaisical about your invoicing practices you might run the risk of sending your client the impression that they can be as haphazard with their payment. Do your book keeping and invoicing at least once a week. Make it easy for your clients to pay you by including the different payment methods you accept by providing account numbers, online links, etc. If you are using an accounting system, consider one that sends out automatic email alerts for late payments. That can help you save even more time.
Keep the cash flowing in your business by streamlining your invoicing process. Making sure your client has no questions or doubts about how much, when and how they need to pay you is key in keeping your business afloat. Efficiency is indispensable in invoicing practices to keep you and your client happy. Follow these invoicing principles to help you achieve maximum cash flow and organization.
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