All business owners can benefit from streamlining their invoicing system. A streamlined invoicing system will provide greater peace of mind for business owners, clearing their schedules to provide the time required to focus on more meaningful tasks.
Here are some tips on how to get your invoicing system humming like a well-oiled machine.
1. Lay the groundwork
Prevention is always better than cure, so if you have doubts about a potential new customer's ability to pay, run some sort of formal or informal credit check before entering into a business relationship. Many new (and not-so-new) business owners feel awkward about frankly discussing payment terms, but it's a necessity. Run any new customer through your invoicing process well before you provide them with a good or service. At a bare minimum, they should not be able to claim at a later date that they were in the dark about when they'd be invoiced or what steps would be taken if they failed to pay within the agreed time.
2. Have procedures in place
Do you invoice when you've finished a job, at the end of the month, or just whenever you get a bit of downtime? Does only one person deal with the invoicing or do a variety of staff members get involved with no clear divisions of responsibility? Do you have an established procedure in place for when a client queries an invoice or says they can't make the payment on time, or do you respond on a case-by-case basis?
The ways businesses invoice will inevitably vary but, as a general rule, everything should be systematised. It's fine to invoice when work is completed or at the end of the month but it's a recipe for confusion if you do a bit of both. If you give a client a two-week extension to pay once, be aware that they'll expect a similar extension in the future. If you don't have a method to swiftly deal with delayed payments, expect to be dealing with endless cash-flow headaches.
3. Make invoices user-friendly
There is no need to turn your invoice into a giant ad for your business, crammed full of branding, self-promotion and 'special offer deals'. An invoice is a request for payment. In order to get that payment as quickly and easily as possible, you should do your debtor the courtesy of providing them with the information they need – the name of your business, your ABN, a description of the product or service provided, the total amount due and the terms of payment – in an easy-to-read format.
Studies show that the majority of businesses are doing things the old-school way – that is, manually generating and snail-mailing invoices out to customers. But with the rise of the cloud, it seems likely there will be a rapid and widespread embrace of automating the invoicing and payment process among SMEs. There are now a lot of companies offering cloud-based invoicing systems and the right one will quickly pay for itself.
Devoting some time and energy to developing a solid system for managing invoices can have impressive effects in terms of freeing up time for you and your staff, as well as improving cash flow and, ultimately, profits.
This article represents the views of the author only and not those of American Express.
Nigel is a freelance journalist and web content provider. Over the past 15 years he has worked for many of Australia's major print media companies and written for a wide range of newspapers, magazines, trade publications and websites. Nigel most enjoys writing about entrepreneurship, popular culture, politics, social trends and small business.