Most small businesses rely on invoicing to get their revenue. That also means an inefficient invoicing process can harm your cash flow. And since small businesses depend primarily on cash flow, you can't afford to ignore invoicing. You need money to pay your vendors, staff, or loans. Any entrepreneur who doesn't manage small business cash flow may suffer a halt in operations. You don't want to get caught in the last-minute rush, calling clients to remind them of payments or trying to make out which bill to ignore when you should be receiving checks from customers. Discover the five main invoicing blunders to avoid.
Streamlining invoicing can encourage early payments and help you manage small business cash flow. The latter relies on how quickly clients make payments, so following best practices is crucial in running a thriving business.
Be sure to verify the information you give in an invoice; otherwise, clients may refuse to pay an invoice with errors. And in such cases, most clients will demand a new invoice that may take time— and lead to delayed payments. To avoid minor mistakes, always keep clear records. You can use a program that enables you to keep track of time and expenses related to every customer and project to prepare invoices based on the data. Also, proofread all invoices thoroughly before sharing with your client to spot and correct.
If possible, send invoices soon after you have rendered the service. And preferably, for your convenience, try to invoice before you deliver the product or service. Please don't wait to send it too late as the client may fail to remember the service offered. They can't recall it clearly, and so they may easily overlook it. Such delays may cause irregular cash flow because you don't know who will make payments when.
Your invoice must mention whatever the payment is for--which goods or services and when. Please give as much info as possible, so the client understands clearly whatever they are paying for. Use Accounting software programs with pre-made invoice templates to create professional-style invoices. However, make sure the template is customizable so you can include all the information you need. A half-filled invoice can cause hesitation and have a ripple effect on how you manage small business cash flow. You also want to spell out your invoice's intention to eliminate any doubt or confusion. Indicate all the calculations clearly, so the client doesn't have to do anything but conform. Ensure your invoice title captures crucial information like which product or service and the specific dates. Stating your intentions from the start triggers the client's memory and may increase the chances of early payment.
Most business clients have invoicingprocedures that you must follow to trigger the payment of any pending invoices. Some expect you to attach the purchase order to the invoice, while others need a statement to clear an invoice. Learning all these upfront and adhering to client needs during invoicing can increase the likelihood of timely payment. 5.Tolerating late payments If you tolerate delays, consumers will always want to pay late. Since everyone has obligations, if you let a hefty late fee go unpunished this time, next time, the client will most certainly assume you are comfortable with late payments. To stop this habit, you should implement late penalties—perhaps a percentage of the balance or a nominal fee. But you may also refuse to offer the client your services until he clears his debt. On top of that, they should also sort any collection or transfer fees you need to collect that payment. These fees should fall between 1 to 1.5 percent per month. Anything above this is not suitable for business. Also, you want to find a business attorney to help you craft the language to include these fees in your company policy. Including penalty fees is beneficial in two ways; (1) Your clients will be motivated to make timely payments to avoid penalties, and (2) You secure more money to manage small business cash flow and survive future problems. The bottom line Even though you can always seek funding from providers to survive cash flow hurricanes, it's essential to maintain a regular cash flow-- which is only possible if you follow the best invoicing practices.
An invoice is usually templated, with the section that will provide an accounting department with what it needs to know to approve, process, and make payments to the vendor in a satisfying and timely manner. Some of the info to include in an invoice include;
Payment terms indicate to the client when to make the payments. Payments terms are apparent to the client; the vendor states when he expects the amount, thus avoiding confusion as typically a client has its pay period that can conflict with that of the vendor. Failure to indicate payment terms can mean delays and further trouble for an entrepreneur struggling to manage small business cashflow.
An invoice number is a reference number for the payment a vendor is going to receive. The invoice number included in the invoice then sent to the client. After paying the invoice, the client can decide to close the purchase number, and the transactions are considered complete.
This section provides the information that is the exact reflection of the description and prices in the purchase order. Changes may be allowed if, for instance, there is a change in commodity pricing.
An invoice with a purchase order number means that the company previously approved the transaction billed. The Accountant is charged with pulling the original purchase order for reference and checking that the information on it matches the invoice.
Vender's name, company name, email address, and phone number should be displayed. The accounting department needs this information to know where to send payments.
The best way to make an invoice is to incorporate one of the many accounting software programs found online. This software offers a useful template that allows a user to add vital payment information without a hassle. It also includes more features to help manage company finances and manage small business cash flow. The advantages of using Saas accounting solutions are;
PDF stands for a portable document format. A PDF invoice is an invoice template with some blank spaces to fill and an excellent tool to encourage faster payments for entrepreneurs struggling to manage small business cash flow. The person filling the invoice is supposed to give out information such as their name, phone number, email address, and invoice number. Other information to be provided include the Client name, the company name, phone number, address, and email address. Also important is invoice number, date, description of product and service, and the total invoice amount.
A PDF, unlike other document formats, allows users to open and review documents quickly without necessarily using the software where the text originated. To convert a document into PDF, you need adobe acrobat or any other PDF software with these capabilities. Below are some of the pros of this file format;
It would help if you mastered the art of invoicing to manage small business cash flow and run a thriving business. Cashflow is everything, and problems with money flow can threaten to halt operations in your business. Follow these tips to get your customers paying in good time.