When it comes to business, there are two tasks that should be at the top of your priority list.
1 – Making sure you have the funds to pay your bills
2 – Making sure you get paid on time
Why should they be a priority?
Because if you don’t get paid, you can’t pay your bills. It’s that simple.
There needs to be money coming into the business to cover the money going out so ensuring you have an easy invoicing system is a must.
Trying to find an invoicing system that works for you can be a bit of a minefield. There are so many different options out there, it’s hard to know where to start.
Our advice? Choose the one that makes life easy for you and the client. The easier it is to use, the more likely you are to get paid on time.
Our invoicing software preference is Xero but there are others available so make sure you do your research.
In the meantime, here are a few tips from us to help make life easier when it comes to invoicing.
Payment terms
Before you set anything up, make sure you have outlined your payment terms. Ideally, these should be included with any contract, so the client knows exactly what to expect.
Think about
- Where, when and how you want to get paid
- How long after invoicing do you expect payment (e.g., 7, 14 or 28 days as standard?)
- What payment methods will you accept? Do you require a standing order or direct debit?
Late charges
Although this is technically covered in your payment terms, we feel it’s important enough to have its own section.
When you first set up a business, it’s hard to imagine charging a client for paying a bill late but consider this. As much as it’s not the nicest thought, try to picture yourself having to explain to one of your suppliers that you can’t pay your bill because you are waiting on a payment from someone else.
It all has a knock-on effect and by having consequences in place from day one for late payments, you will reduce the chances of it happening.
It’s a hard line to take but the reality is, you need to protect your business.
Automation
With any business, whether new or established, time is of the essence. Trying to balance every task is challenging so the if you get the chance to make life a little easier for yourself, take it!
Automating your invoicing is easy, cost-effective and time efficient. Use accounting software that will send out invoices automatically and on a recurring basis, and even send reminders when payments are late.
The devil is in the detail
Set your invoices up to include as much information as possible. For example,
- Payment terms
- Quantity of product or service
- Unit price if applicable
- Subtotal
- VAT
- Total
- Bank details
Don’t forget that last one!!! If your bank details are not on the invoice, you can’t get paid!!!
Avoid complicated terminology
There is nothing worse than trying to understand another business’ complicated dialogue. If you want to get paid on time, make sure you speak plain English. Do not assume that your clients will understand industry lingo. They won’t!
Set reminders
It’s always advisable to set up invoice reminders to go out regularly, particularly if you have a delay in when the payment is due from the date of invoice.
For example, if you opt for 28-day payment terms, the invoice should go out on day 1, you can send a reminder on day 14 and a final reminder on day 21. That way there really is no excuse for late payments.
Use references
Always include a reference in your invoice and request that when payment is made, the client states that same reference. It stops any confusing and payments getting mixed up.
Keep it simple
The key to successful invoicing is to make it as easy as possible for the client. When researching invoicing software, the customer journey should be at the top of your list. The easier it is for the clients, the more chance there is that you will get paid without complication.
Be consistent
This really goes back to when we said about setting up recurring invoices. If it isn’t a one-off payment, make sure the client knows exactly when they should expect your invoice and make sure that happens.
Invoicing really doesn’t have to be a headache. It can, in fact be extremely simple. Choose the right software, automate as much as possible and just watch the funds come in.
It may also be a good idea to talk to a good Bookkeeper as they are experts in making sure your payments are consistent and correct.
As always, if you need some help, #JustASBK.
