In many business industries, the small business owners depend on the invoicing to get paid. In case the invoicing process has some gaps that can adversely affect your overall business cash flow, and you need to learn some effective invoice methods to improve your cash flow. Companies live and die by cash flow — if you don’t have sufficient capital on hand, you can’t pay for the inventory, loans, vendors or employees. In the end, a negative or bad cash flow can ruin all your business operations. One way to prevent from all this, you can get funding from invoice factoring. Here’s what you need to understand.
How Ineffective Invoicing Upsets The Cash Flow?
Ineffective or unproductive invoicing strategies can slow down your cash flow. Rather than getting checks from your customers, you will be looking to find out which invoice can be ignored or spending time making follow up calls to get customers to pay. Here are three of the essential invoicing mistakes and how they can affect the overall cash flow.
In case you send out invoices with the incorrect details, customers can additionally decline to pay them. In instances like this, the customer is likely to call and request for a new invoice that takes time and also delays your payment. It is also suggested to maintain detailed records to keep away from mistakes.
For instance, consider using an invoicing application that allows you to track hours and costs related to every client and project so you can without problems generate invoices based on that records. Additionally, don’t forget to double check every invoice before you submit it to make sure that there are no errors.
Preferably, you have to constantly send the invoices as soon as possible after the service is rendered, and if suitable for your small business, you may need to invoice earlier than the goods or services are shipped. In case you wait too long to send the invoice, your customers may have already forgotten about the services. It’s not clear on their minds, and consequently, they’ll ignore the invoice. This situation upsets the overall cash flow of your business, and it makes it quite difficult to understand who will pay and when will pay.
Accepting Late Payments
In case your customers know that they can pay late, they usually will. Whether you are managing other small businesses or individuals, most people have other responsibilities. If one invoice has a large late fee and another has no outcomes for late payments, customers will ignore the latter one.
If the latter is the case, you will not get the invoice factoring you require in time. To prevent this from taking place, you may have to implement some late penalties. This could be a small percentage of the balance owed; however it may additionally mean rejecting to deliver service to that customer again until they pay. The expenses in this case should act as an impediment; however they additionally need to cover the collection activities costs.
How Effective Invoicing Upsets The Cash Flow?
The right type of invoicing method for you highly depends on your customers, your personal and your business priorities, however using the following strategies can help you to improve your overall cash flow.
Timely & Early Payment Discounts
Delayed invoicing can set off episodes of late payments or overlooked invoices, timely invoicing can have different consequence. Send invoices to your customers as quickly as possible. If they know about it, they’re more likely to respond to the invoice.
On top of that, you may need to offer some sort of incentives to early paying customers. For example, in case your customers pay at the time of service, give them discount. Doubtlessly, this can be more effective as compared to disciplinary measures as many are reward motivated. When coping with your small business, it is important to confirm that you don’t unintentionally you’re your money you need by offering an early payment discount. For instance, in case you provide a 10% discount for early payment, the discounted rate ought to be the amount you want to make for the service, and the rates have to be slightly more than the amount you need to make.
Sending Reminders On Invoices
Sometimes, someone forgets to pay an invoice. Push your client’s by sending a reminder. Preferably, you need to have an automatic invoicing process that can send reminders to the customers. In case you don’t have an automated system in place for the invoices, set reminders by sending an email or text message. Spare some time to check out the unpaid invoices and if a customer hasn’t paid yet, send him a reminder. If small business management is something new to you, this might feel strident; however it is not.
Simple Invoice Payment Options
Finally, you have to make it easy for your customers to pay you. This can depend on what your customers need. For some customers, it’s easy to mail a check. If your customers fall into that class, you can consider accepting the checks.
For most customers, it is less difficult if you digitalize the whole process. There are all types of invoicing applications wherein you simply send the invoice over email. After that, the customer clicks a link in the e-mail and automatically will pay the invoice online with a credit card or via a payment processing service. The payment convenience can simplify the process.