When a customer owes you money, it can really tie things up. After all, it cost you money to produce the quality products and/or services your customer wants. So to have them break a contract and prolong repayment is not only an inconvenience, it's downright annoying. While you can't always weed out the good customers from the bad, there are ways that you can safeguard your business going forward so that you're not always left in limbo.
Effective invoicing your customers can help you get paid a lot faster. Below are some tips to efficient invoice management and processing:
- Have a Backup Plan
The first thing you should do is look for other avenues that can generate cash flow in the event that you need money fast. A popular method for small business owners is invoice factoring. For example, TBS accounts receivable factoring creates an opportunity for small business owners to sell their outstanding invoices in exchange for a percentage of the balance upfront. Invoice factoring companies will pay you for your accounts receivables and allows you to move forward with business without the need to collect the funds from customers.
- Create Clear Sales Agreements
To ensure that you're protected and that your customers know exactly what you're asking for it is important to have a sales agreement in place. When drafting your agreement, it is pertinent that you spell out exactly where and to whom the payments should be sent. You also need to write out how much is due, when it is due, along with consequences for late payments. The more detailed you are about what you expect, the easier it is for the customer to comply.
- Itemize Everything
When creating an invoice it is important to have a separate line item for every product or service you're billing the client for. While it might seem obvious to you what they're paying for, you need to spell it out so that there are no confusions later on.
- Implement a Tracking System
In order to keep an adequate paper trail of your invoices and outstanding balances it is a good idea to implement a tracking system. Most invoicing software databases will suggest consecutive numbers and letters on invoices so that they're easy to track.
- Short Payment Periods
It might seem like a benefit to offer you customers a longer time to repay the balance but this can backfire in the end. Typical payment terms are 30 days and you should try your best to stick to that. The longer you allow your client to wait to make a payment, unfortunately the longer they will take. If you're familiar with the, "out of sight out of mind" concept, then you know exactly where your invoice might end up if you allow your customers too long to pay it back. For long term customers or those with higher credit ratings you might offer an extended time for payment.
- Be Polite Yet Firm
Should your customer be behind on an invoice payment it is important to communicate in a timely fashion. When reaching out via phone, email, or mail, you should use language that is firm yet polite. Demanding your money in a harsh way is a surefire method to not getting paid. However, a friendly reminder and a thanks for their business can be just the gentle nudge they need to issue payment. Remember to use your manners with please and thank you as customers can appreciate that.
No one likes invoicing. However, it is a part of business for many companies. The above tips should certainly help you in streamlining processes so that you get paid for the goods and services you've rendered in a timely fashion. Start implementing these today for a less stressed and more lucrative financial future.