A study conducted by the National Small Business Association found that more than one-quarter of small businesses fail because of lack of capital and poor revenue generation. Ensuring an effective invoicing could have saved many of these enterprises.
Once a business is operational, invoicing process plays a crucial part in maintaining its fiscal health. Cash inflow is highly dependent on this step. Any delays in payment or non-payments could mean reduced available cash that the business can use to fund its operations. Without an effective billing, a business’ financial health is in a precarious state.
It is for this reason why business owners and managers need to ensure an effective invoicing process. The physical act of issuing an invoice to customers is just one component of the process. Effective invoicing requires maintaining good communication and managing customer relations. Its ultimate goal is to collect payment in a timely manner.
Below we take a look at six useful invoicing tips to ensure prompt payments, avoid delays and non-payments, and keep customers coming back.
Create professional invoices
Your invoice carries your company name and logo. It is a part of your branding. As such, it is important to make it appear professional. Aside from aesthetics, keeping it organized makes it easier for customers to know what needs to be paid. Hence, the more likely you’ll get paid.
Your invoice must clearly identify your business name, so the recipient would instantly know where it is coming from. It should include details such as customer name, your contact details and address, numbering system, items list or work completed, costs, and taxes. It should also contain details about the payment terms and options. The best format for invoices is PDF, so if you create invoices in Microsoft Word, convert your invoice from Word to PDF before sending it. By making your invoice organized and neat, there will be less questions and customers would be more willing to pay.
Decide on an agreeable credit terms
Basically, the shorter the payment terms, the better for your business. However, picking credit terms should be balanced between your need for revenue and the competition. Quite obviously, customers will go for businesses that offer longer payment terms as compared to those with shorter offer. If you want to stay competitive, make sure to check the credit terms offered by your competitors.
On the other hand, you should also consider the fact that customers don’t feel the pressure to pay until the deadline is imminent. Keep the credit terms short so they are obliged to pay sooner. Moreover, in some industries, the default invoice term is “Payable upon receipt.” If you’re allowed to do so, this is the best option. The payment clock ticks as soon as customer receives the invoice.
Make it easier for customer to pay
Perhaps this is one of the best ways to improve your revenue collection. Offer several payment options to encourage customers to pay promptly. There are several ways customers can pay you. Some conventional methods include cash, check, credit card, money orders, and automated clearing house (ACH). These payment methods often require customers to visit your office to pay or send payment via courier.
There are also mobile or online payment portals which are more convenient for most customers. With this option, they don’t even need to leave home or work to pay. Customers just needs to open an account and link their credit card. Usually, these online portals charge either a certain percentage per transaction or a flat monthly subscription. Some popular online payment gateways include PayPal, Amazon Pay, WePay, Chase, and Stripe.
Increasing your payment options make your business more convenient to customers. Hence, they are more likely to come back. However, not all payment options are the same. Some offer unnecessary risks, so you have to carefully study which one is best for your business.
Verify customer information
Before sending an invoice, make sure to verify your customer identity and his address and contact details. If you type in the wrong address, there will be no way the invoice will reach your customer. You might be waiting in vain for payment.
Confirming customer information is necessary for both new and existing customers, especially if you don’t have regular transaction with them. Some might have already changed home or work address. By verifying the client information, you can avoid delayed payments and delinquencies.
Automate the billing process
Running a business entails a lot of concerns – and billing can be an added burden. According to an enterprise billing software developer, automating the invoicing process can solve many of your woes. It enables you to collate customer information in one database, create and send invoice instantly, schedule billing statement and reminders, and track and manage pending or unpaid invoices. With a billing software, you can easily create and send invoices anywhere, anytime.
Invoice as soon as possible
Lastly, send an invoice as soon as the products are delivered or services are rendered. Don’t wait long before doing this. The sooner you bill your customers, the sooner you’ll get paid. Your customers would also appreciate your prompt action as it will allow them to prepare. Alongside quick issuance of invoice, you should also deliver on time. This shows your professionalism – something that customers are looking for.