Invoice Well: Get Paid
In our day to day business operations we see a lot of invoices. A core centerpiece of Business 101, when you sell items to a customer or perform a service for them, a proper invoice outlines what work was done, and what compensation is owed in return. Although it may seem simple, when starting a business finding a consistent method for invoicing correctly and managing your accounts receivable can take some time. As a factoring company, we specifically advance our clients capital based on their invoices to customers, so reliable billing and collections are critical in our business. And for our clients, cash flow is the lifeblood of any business and making sales, billing and collecting is the fastest way to additional cash flow.
The Basics
It’s not too simple to consider - are the basics on my invoice? The legal name, address and contact information for your business as well as your customers’ business. What items, exactly, did they buy? What services did you provide? Detail is best whenever possible as it leads to fewer discrepancies. Also, a date! There must be a valid date on the invoice to determine payment terms.
Payment Terms
Sometimes business owners struggle to set payment parameters. However, leaving this in the hands of your customer is unwise, as they are likely to take much longer to pay than you would like. It is important to first broach this subject when the sale is happening. Set good expectations of when you are expecting payment. For example:
Prepayment - All funds are due prior to receiving the product or service.
Downpayment - A portion may be due up front with the rest to follow.
Upon Receipt - Some versions of this might include Cash on Delivery or payment due when invoiced.
Net 10, 30, 60 etc. - If you’d like to extend your customers credit terms, you can give them a set number of days to pay from the invoice date. Remember that this lengthens the amount of time that you have to fund your business before receiving cash. Also, it is important to follow up and enforce these dates to encourage customers to follow the stated payment terms.
Remittance Information
Finally, how will they pay you? Do you accept credit cards? If you prefer check, who is it made out to and where should it be sent? Include Wire or ACH information for direct money transfer payments. Giving customers more available ways to pay is important. Make it easy for them to pay you! Do not send out invoices assuming they will know how to get you the funds. Make it very clear.
With all accounts receivable, you will have customers that do not follow the stated terms on the invoice. They may take longer to pay, not pay the full amount, send it to the wrong place or dispute the invoice. Be sure to address as many of these prior to invoicing as possible and to make clear, easy to read invoices. Resolving these conflicts quickly will get cash in the door more quickly. Set aside time each week to review bills and invoices and distribute them to the correct parties. At the same time, review accounts receivable and follow up with customers who are late in paying. Consider a returning customers payment history when invoicing the next time around.
Sales are a great thing, but careful management of billing, invoicing and collections is critical to getting cash flow into your bank account. Take stock of your process and look for places to improve it.
