When it comes to invoicing, many small business owners find themselves getting anxious. Especially when a client has missed a due date. As a business owner who either directly manages billing or oversees the billing process, it can be stressful to add chasing checks to your to do list.
While no system is perfect, there are many things you can put in place to minimize the stress of following up on invoices and running the risk of delayed payments.
Set Up Automatic Payments for Recurring Clients
If you have clients that are on an extended contract with the same amount billed monthly, you can set up automatic payments using various accounting software. This allows for easy and secure transactions, helps with your business’s cash flow and is a benefit for your customers. We talk more about the perks of automating customer payments here.
Require A Deposit
Requiring a deposit prior to completing services can serve as a means of building trust with your clients, and gets you cash in the door prior to beginning services. This demonstrates to clients that you will finish their project within the agreed upon timeline, and helps secure your cash flow.
Set A Reminder System
You can set up automated emails to remind your customers of upcoming due dates prior to sending the invoice. You can also send reminders after sending the invoice, but be sure to this on a schedule. This way you are not nagging your clients, or giving the appearance of being desperate for payment. Having reminders before or after a payment is due can be helpful and ensure payment; however, waiting too long to remind your clients and then hounding them is something you should try to avoid.
Assess Late Fees
When you have an agreement with a client, you can include that delayed payments will incur late fees. You can also send over a notice of such a policy. Even if your late fees are small, most people do not want to pay additional fees simply because they forgot to pay an invoice on time. More than anything, late fees are a deterrent for late payments, and collecting extra fees for delayed revenue can help make up any extra costs you incurred while waiting.
Make Sure You Have A Written Agreement
Having written agreements are crucial for a variety of legal reasons, but when it comes to invoicing, a written agreement serves to lay out the terms of service and set a payment schedule. This can be vital to keeping a client committed to paying.
Send Invoices On Time
It seems a little obvious, so we put this low on the list, but it’s definitely one of the first things you need to make sure you do. Sending an invoice in enough time for your clients to make the payment is important, because it can help ensure prompt payment. Not only do clients have enough notice to make sure the funds are available, it can also ensure that you are on the schedule for whatever their payment cycle is.
Use Invoicing Software
Accounting can be tough, even if you are a genius with your numbers, having to manage your services, client interfacing and accounting can be a drain. There are a number of accounting software available at different levels for varying prices.
If you are currently using Excel to manage your invoicing, billing and balance sheets, we strongly suggest you look into accounting software.
We always caution that accounting software can be deceptively easy and that it is best to have a CPA help you manage such software, but if you are not ready to hire an accountant, using software can help you keep track of trends and turnover in receivables.
Following these practices when it comes to your invoicing can help cut down on the drama of delayed payments.
For help managing your business finances, check out our services page. Desnoyers CPA, is an accounting firm that offers a wide range of services for business owners. Check out our monthly blog and join our mailing list to get more information for small business owners seeking experienced financial advice.