Once you’ve made the leap from employee to business owner, one of the first questions to consider is how to ensure that you are paid in a timely and organized manner. It’s easy for a business to go under due to lack of cash flow, too many customer debts and a lack of proper bookkeeping.
In order to avoid falling into these traps, It’s important to plan ahead for invoicing customers. You can ask other business people for advice on invoicing, but remember that each business is different and you need a system that is appropriate for your company and for your method of working.
Take some time to set up a system that works for you and you will end up saving time and money in the long run. These are the six steps we recommend taking to prepare yourself for efficient billing and invoicing:
- Keep accurate records of your work. In order to invoice, you need to know what work has been carried out. It’s hard to remember at the end of the month what did you did at the beginning of the month, so you need to track work as you go along. If you bill per hour, make sure you use time-tracking software so you know exactly how much you worked. Use time-management platforms to record your tasks and don’t forget to include materials if relevant.
- Decide how often you will invoice. You may want to invoice more regularly for products as opposed to services, and you may negotiate a different deal with each client. However, it is important to pay attention to cash flow and not allow too much time between invoices. Once or twice a month is the recommended frequency. Don’t forget to send out invoices at the time you have set; sending a bill long after the work was done disrupts your cash flow and may cause accounting issues for your customers.
- Define your accepted payment methods. If you want your customers to pay quickly, make it as easy as possible for them to pay. You can accept a range of payment options, from credit card and check to PayPal and other online methods. Although some payment methods will cost you in transaction fees, it is likely to be worth your while since you will get paid more speedily.
- Set up your invoices to include a “payment due by” date. In addition to letting your customers know you expect payment within, say, 14 days, it is helpful to include an actual date on the invoice. This way the customer doesn’t have to calculate or conveniently become confused about when you are expecting payment. To ensure timely payment, you can either charge a late fee, or even more effective, offer a discount for early payment. (When you quote a price to the client, add this discount percentage on to the total so you don’t lose out by offering the deal.) Remember that payment will arrive only after you send out an invoice, so don’t put it off and don’t be passive. If payment is not forthcoming, chase it down and politely and firmly make it clear that you expect immediate payment.
- Create professional-looking invoices. If you want your business to be taken seriously, you need serious-looking invoices. Make sure they include all the pertinent information and are printed nicely. Using online software which creates the invoices for you and sends them via email is the easiest way to do this.
- Don’t forget the human touch. If you are sending invoices to large companies, it’s a good idea to pick up the phone and introduce yourself to someone in the accounting department. Since the person now “knows” you, your invoice will get personal and speedy attention when it arrives. If there are any issues to be ironed out, the process will go more smoothly once you have made phone contact. For invoices sent to smaller companies or individuals, consider sending a short and friendly note along with your request for payment.