A small business owner wears many hats, including the accounts receivable one. It’s easy to think all you have to do is open a Word document, type in what is owed, and print and mail this handmade invoice. Even that seems to take way too much time.
In reality, this process for small business invoicing is working against you on many levels, including the lack of a professional appearance, timely payments, and optimum cash flow. All of these are vital to a small business owner because they help sustain and grow results.
However, incorporating some best practices for small business invoices like these seven tips can dramatically change how you market your business through your invoices plus are proven ways to speed up payments and increase cash flow:
Migrate from paper invoicing to online invoicing
Software now available makes it extremely easy to move away from paper invoicing, which is time-consuming, lengthens the turnaround time on payment, and decreases the professional look and branding opportunities you could have if you just used an online invoice solution. The online invoicing technology typically offers templates that allow you to add a logo and create a custom look that stands out to the recipient. Plus, you can email the invoice to your client, which saves time and money and gets it in their hand quickly. Clients typically like the convenience and often pay as soon as they receive this online invoice.
Keep the invoice layout simple and easy to read
Another advantage of online invoicing software is the inclusion of templates to help all you small business owners out there that know they don’t have a graphic design bone in their bodies. These templates typically follow the best design rules, which are to keep the layout simple and uncluttered so it’s easy to read. The faster the client can find the main information about why they are getting the invoice, how much it’s for, and where and when to pay it, the quicker you will get paid. Otherwise, you might have to wait while they ask questions or figure it out on their own.
Integrate various payment methods with your online invoicing solution
Providing more ways to pay you is always a good way to speed payment because it gives your clients the options they may need for their own cash flow. For example, only accepting a paper check as payment can really slow down payment because your client may want to hang on to their money as long as possible; plus you have to contend with snail mail to receive it. However, if you offer a way to pay by e-check or even accept debit and credit card payments, your client more than likely will pay you much faster because they are in control of the payment type.
Formalize your invoicing and payment policies
When clients don’t have a set of rules to follow, they will tend to do whatever suits them. You can change this behavior by training them to follow a set of formal policies that creates a framework for how you would like to work together. These policies should be written down in the form of an agreement or contract between you and your client so everyone is on the same page. Think about what is important to include as part of these policies, including if payment is taken upfront, requested when project work is completed, or split into even payments throughout the project. Determine the payment times before a late fee is added on, so you can list things like “payment upon receipt” or “payment net 30 days.” Your agreement should also list the type of payments you accept and how you deliver your work in relation to payment. This sets expectations for both you and the client so it does not become an issue each time you send an invoice. Don’t forget to ensure that both you and your client have a signed copy of this agreement.
Use a numbering system on your invoices
Using a numbering system not only helps with your record keeping, but it also can be a point of reference to help your client when communicating with you about a specific invoice and to maintain their own records. When you use online invoicing software, this is typically a feature that is included and is done automatically for you.
Don’t delay in sending your invoices
While you may get busy and either forget to do the invoices or decide they can wait, your cash flow doesn’t want to wait. The longer you procrastinate in sending the invoice, your client will end up with the “out of sight, out of mind” approach because the project has long been finished and they have moved on. Meanwhile, you are still waiting to get paid. The best practice is to immediately send your invoice. It shows you value promptness and that you are professional. After all, you deserve to be paid for all that hard work.
Make your invoice a marketing tool and vehicle for data collection
You may not have much of an opportunity to share information with your clients so your monthly invoice can be a way to market yourself, potentially adding business with them, or incentivizing them to pass your name on. Without putting too much information on the invoice so it becomes overwhelming to read, consider a few brief marketing messages related to new services or products now available, an upcoming promotion, or a reward benefit for any referrals. The invoice could even include a link to survey where you can gather feedback or other information that would help you improve the client experience.
Consider invoicing as an extension of your business strategy rather than a mindless, time-consuming task. It’s a very necessary tool that you can improve that delivers the cash you need to thrive and grow your business.