Collecting money for services rendered or products purchased can sometimes result in a frustrating game of cat and mouse if you're not carefully looking at everything involved with invoicing before conducting business. It is always good practice to have invoicing terms in place early on. When you develop a detailed plan of action of how you will handle invoicing, you’ll be able to make your employees and customers aware of the details and avoid unpleasant issues or cash flow problems for your business.
Regardless of what type of business you have, practising good invoice etiquette enables you to maintain a professional rapport with your clients and it saves time and frustration. Below are ten tips that will help you develop a reliable invoicing process for your small business.
#1 Automate Invoicing
Having the proper invoicing software will not only save you time, but it will also provide you with an organized way to automate the invoicing process, review past due invoices, assess late fees as necessary and put customer information right at your fingertips. There are a variety of applications available including free invoice maker apps and you can use an invoice template. Getting invoices set up and automated will improve efficiency for you in keeping up with accounting details, leaving you more time to focus on growing your business.
#2 Define Payment Terms in Advance
By choosing to establish payment terms in advance it will help maintain good relationships with customers and alleviate chances of miscommunication.
Decide if you will bill by the hour or by the projects or products.
Set rates for specific services and adhere to them.
Communicate the payment terms with clients upfront.
#3 Create and Stick to Your Policies
Having a successful business requires a variety of policies to help ensure that everyone involved has a clear understanding and is on the same page. You have policies for employees, so it is sensible to have policies for customers as well, including a return policy as well as an invoice policy.
The invoice policy would detail payment terms such as: due upon receipt, due in 21 days, due in 30 days, etc. It should also convey fees for late payments, which are generally based on a flat dollar amount or a percentage amount. Defining these details and making customers aware of your policies will be appreciated by clients and is simply good for business.
#4 Make It Easy for Customers to Pay You
You will want to make it as simple as possible for customers to pay you. In order to do this, you should plan to accept a variety of payment types including ACH, and a few different credit card types. Also, consider setting up payment options so your customers can pay online. Whether this is a payment link on your business website or a link provided through your invoice software, making it easily accessible and user-friendly for your customers will get you paid faster. Most platforms typically charge a flat fee or a percentage based on the transaction amounts but deem this as a necessary cost of doing business.
#5 Be Polite
It is important to use appropriate wording on invoices so that instructions are clear, yet still practice good customer service habits. According to statistics, polite verbiage helps get invoices paid faster. For example, on the invoice, use “Please pay by...” as well as including a note such as “Thank you for your business” or something personalized to your preferences. Also, be sure to include the terms of payment, whether 21 or 30 days or due upon receipt.
#6 Charge Interest on Late Payments
Naturally, you want to deter late payments but in the event they occur, it is wise to charge interest on late payments. You should convey this in a polite manner on invoices as well by using wording such as, “Thank you for your business. Please pay within 21 days to avoid a late fee. There will be a 1.5% interest fee charged on any payments received after the allotted time.”
#7 Require Down Payments for Large Projects
Some projects require more time or larger upfront costs. If you have clients that fit this category, don’t hesitate to require a down payment on the project. An acceptable amount for this is typically half the cost of the project. When you ask for a down payment, it reduces the chances of the client backing out and it also ensures them, you’ll have the project complete by the proposed deadline. Additionally, the down payment protects you by covering upfront costs and decreases the costly consequences of dealing with late payments.
#8 Courteously Follow Up on Late Payments
Anytime clients fail to make a payment on time, you should always follow up with them immediately. Most invoicing software will offer a feature that sends out automatic payment reminders. However, sometimes people need a little nudge, in which case you should politely contact the customer via phone and invite them to pay with a credit card while you have them on the phone. Always maintain a professional demeanour with customers.
#9 Deliver Digitally
Getting set up to deliver invoices digitally is a great practice to use. Not only does this save you postage of mailing out invoices, but for those slow paying customers, you have the option of resending the invoices via email. Also, collecting the email addresses of clients is a great way to contact them when you’re offering promotions, informing them of an upcoming sales event, or sending them a thank you, which strengthens relationships with clients. Also paying your employees with a payroll software within the same ecosystem will help.
#10 Include Contact Information
Regardless if you are invoicing a long-time customer or a new one, always include contact information. Make it as simple as possible for customers to contact you with a question. Be sure you include the business name, mailing and email address as well as a telephone number. Again, you want to make the process of paying you as easy as possible for them.
By implementing these processes, your cash flow will be steadier; you’ll avoid confusion and provide good customer communication. Also, by setting up an invoicing system, you will reduce your burden and have the ability to track invoices for future reference and/or tax purposes.