Asking your clients or customers to pay an invoice isn’t the highlight of the day for business owners. However, it’s an essential task that will make or break your business. That’s why having a formal, professional invoicing system is so important.
It will also help you keep track of your accounts receivable and billing. This makes invoicing as painless as possible for both you and your paying customers. In turn, this will get cash flowing more quickly into your bank account.
But, how can you create a well-oiled invoicing machine? Start by implementing these eight tips when setting up a killer invoicing system.
1. Pick an invoicing system.
Ditch the spreadsheets and manual invoicing by selecting a cloud-based invoicing system. Switching to an electronic invoicing system allows you to create and send bills electronically. This means no more waiting in the mall for a check.
This also saves you money since you no longer have to pay for postage, paper and ink, but that’s only the beginning.
Most electronic invoicing systems let you create, manage and review invoices on your mobile device. This means you can take the office with you wherever you go. Additionally, you can automate your invoicing by setting-up recurring payments and payment reminders.
Some invoicing platforms even “ping” customers until the invoice has been paid. Other systems, like Due, come with features like time tracking, expense management, and project management.
2. Input customer information and standard billing amounts/items.
Once you’ve selected an invoicing system, it’s time to get organized so that you can starting invoicing clients immediately. The obvious starting point is by inputting your customer’s information on your invoice. This includes their name, email address, billing and mailing address, and preferred payment method.
Having this information stored will allow you to issue invoices in a matter of minutes or set-up recurring payments. This is ideal if you have a subscription-based business or have been hired for a long-term project.
You can also save time when creating bills by only entering typical billing costs once into your system. For example, if you’re a freelancer you would input your hourly rate into the software. Your total bill will then be calculated automatically.
Remember, the faster you send out an invoice, the faster you’ll get paid.
3. Establish payment terms and policies.
Your payment terms and policies determine when and how your invoices will be paid. If you’re a freelancer you should discuss these terms and policies with your clients in advance. This way they’re not surprised when they receive a bill out-of-nowhere.
You should also find out the payment schedule and preferred payment method of your clients. This ensures that there’s no hiccups in the billing process. For instance, your terms and policies should be flexible so that your clients can pay the invoice with ease.
If it’s painless for them, they’ll be more inclined to pay an invoice without hesitation.
It’s also in your best interest to set a payment policy with short terms. For instance, a majority of my clients pay within 30 days. In fact, most of them pay within 15 day — if not immediately. Because I’ve established shorter payment terms I’m able to receive money faster.
4. Design your invoice professionally.
Believe it or not, the design of your invoices matter. This is because poorly designed invoices can cause confusion and annoyance. They also demonstrate your lack of professionalism, which isn’t going to influence a client to pay your bills on-time.
Don’t believe me? Then checkout this entertaining rant on Medium about the effect that badly designed invoices have on people. A well-designed invoice ensures the client that you’re a professional. And, as a professional, you deserve to get paid. It also differentiates from all of the other bland and generic invoices your clients receive.
Designing an invoice may seem overly complex. In reality it’s rather simple as long as they reflect your brand. This means that your invoices should include;
– You logo.
– Brand’s colors.
– Clearly defined payment terms.
– Itemized list of services/products.
– Contact information.
– Invoice number.
– Due date.
– Personalized message that thanks your client for the payment.
Most invoicing software allow you to simply drop-and-drag your logo onto a premade template. This will automatically issue items like the invoice number. This means designing your invoices have never been easier.
5. Use the carrot and the stick.
Despite practicing invoicing best practices, there will be times when a client simply doesn’t have the money to pay you. Even worse? Some clients may wait until the last minute.
Don’t lose your cool. Have a strategy in place that will entice the client to pay your invoice on-time,” writes Deanna Rampton.
For example, you could use the following carrot and stick combo:
For the carrot, you could offer an incentive. This could be a discount off the total amount of the invoice if paid early. For the stick, you could implement late penalty fees when the invoice goes past the due date. This could simply be a small percentage or flat fee.
“If those tactics don’t work, consider offering a payment plan. You may receive a smaller payment each month, but it’s better than nothing,” recommends Rampton.
6. Keep good records.
Miranda Marquit writes, “Make sure that you keep records of the work you’re doing. If you freelance, keep track of the project. If you charge hourly, make sure you have time tracking that can prove what you spent.”
“From inventory to time to published tweets, whatever it is you’re supposed to be measuring, keep track. You want detailed records to back up your invoice,” adds Marquit. This way you can back up your claims if a client disputes the bill.
“This includes keeping records of contracts and other materials that you can return to. Carefully organize your paperwork and documentation so that things don’t fall through the cracks and wind up holding you back.”
You should also track your payments, such as which invoices have been paid and those that haven’t. Again, invoicing software will do this for you, but you can’t solely rely on automation. There will be times when you’ll need to pick-up the phone and ask the client why the bill is past due.
7. Always keep it professional and polite.
Make no mistake about. There’s absolutely no substitute for professionalism in business — and that does include invoicing.
Always use your manners by wording your invoices politely by using “please” and “thank you.” Ask your client to pay the invoice by a specific date by writing “please pay by X date.” Or, “please pay in-full within 15 days of receipt.”
You want to be seen as a professional while building strong relationships with your clients. And, nothing accomplishes that like treating them with kindness and respect. That even includes when you’re asking a deadbeat client for money.
8. Know when to enlist outside help.
While invoicing is essential, not everyone has the time or knowledge to effectively create and manage all of your invoices. In those situations you may need to seek outside help. For example, you may want to hire a bookkeeper or freelance accountant to handle all of your invoices.
But, if you want to tackle invoicing on your own, you may need assistance with;
System set-up. Most invoicing software is easy to use from the get-go. But, some systems may require an expert to train you or your staff so that you can use the software properly.
Establishing Credit for Customers. It’s not uncommon for businesses to issue lines of credit to their customers. Consult a Credit Bureau service or credit-rating agency so that they can review the credit of your customers. The last thing you want is to issue credit to a customer who isn’t capable of paying you back.
Collecting Overdue Accounts. Despite the reminders or accumulating late fees, there may be a client who has no intention of paying your invoice. In this case you may need to hire an attorney or collection agency to chase these late payments down.