Let’s face it – you opened your own business to make money. Sure, working for yourself offers more flexibility, and yes, you do get to call all the shots, but at the end of the day, you more than likely had visions of Scrooge McDuck like cash in your head.
Now that you’re a few months or a few years in, how is that cash flow going? If you’re like most small businesses in the U.S. you’re probably sitting on more than $80,000 in unpaid invoices. This means that these invoices are 30 days past due. For the majority of small businesses, they only have 27 days worth of money reserves; payments this late can really hurt your bottom line.
Working on small margins makes these numbers staggering in their size. So, aside from threatening phone calls, how can you help your company get paid faster?
One of the best ways is to have a professional-looking invoice with features that make it easier for your vendors and clients to pay. Let’s examine the top 5 ways you can encourage your vendors and clients to pay you quickly, including an easy way to generate a professional-looking invoice.
5 Ways to Get Paid
Use a system that enables e-invoicing and e-payments.
Everyone is online nowadays. Ubiquitous mobile technology has made it easier than ever for business owners to keep track of their business, no matter how far flung the job site. Leverage the power of this technology – and its speed – by using an invoicing system that enables e-invoicing (most vendor risk management software has this component).
In most cases, an e-invoice can be sent directly from the system, and then offers the recipient a direct link back to your site in order to make the payment. You can, of course, also use email by attaching a PDF of the invoice to the message, but this doesn’t allow for speedy payment, just speedy invoicing.
Reward good behavior and penalize bad.
One way to ensure our clients pay on time is to penalize them for bad behavior; a.ka. charge them more money if they submit their payments late. The flipside of this is, you should also reward clients who pay early. You can build these amounts into your invoice, including an amount for payment received by a certain date. A 2-5 percent discount can be a powerful motivator for a client or vendor to pay early.
Investigate the feasibility of collecting a deposit.
This method may not work for all industries, but for jobs where you may have to shell out a lot of cash up front – maybe for construction materials – it’s best to ask for a deposit from the client before work begins. This will help you to cover these upfront costs and help to keep the client honest. Once they’ve made an initial payment, it seems silly to not follow up and fulfill their agreement with you.
You can also look into putting some clients on retainer. A retainer is a set amount, usually collected monthly, that helps to cover ad hoc work that might come up and doesn’t require a full blown proposal or contract. This is especially useful for industries where interim work, like minor repairs or advertising work may be an issue. You can learn more about retainers, and the intricacies involved by clicking here.
Don’t hesitate to follow-up.
You won’t get paid if you suffer from an abundance of politeness. It’s okay to follow-up with clients on a regular basis regarding payment; especially if their payment is already late. You of course want to remain as polite and cordial as possible, but the adage, “the squeaky wheel gets the grease,” has stood the test of time for a reason. Because it’s true.
Depending on how much money the client owes, there is also the option to withhold future work until their accounts are settled. This can create an antagonistic relationship, however, so tread lightly. For most small businesses, the keys to the coffers might lie solely with your contact; for larger corporations though, there may be a morass of red tape your representative is trying to wade through. It’s important to understand the company’s internal politics regarding payment, before making any thinly veiled threats about withholding work.
Make your invoice as professional-looking as possible.
Looks matter, it’s true. To ensure that clients take you seriously, which in turn will help to legitimize your business, use a professional looking invoice template. You don’t have to spend a ton of money to accomplish this either. QuickBooks offers a free Invoice Generator, that allows you to input all of your details to create a polished invoice. These are the key categories you should be sure are available on whatever invoice system you use:
- Client or Vendor Billing Address and Phone Number – It’s possible that these contact details are different from the ones you have on file for your contact. If the business has more than one office, they may handle billing at another location.
- Client or Vendor Contact Name – Check with your client contact to find out who should be listed as the contact in regard to payment. Depending on the size of the organization, they may have an accounts payable department and if the invoice is sent to or addressed to the wrong person, it may just languish in cyberspace.
- Your Billing Address and Contact Name – Turnabout is fair play. Make sure that the details for your billing address and contact are correct.
- Your Billing Phone Number and/or Email – These must be accurate! It cannot be stressed enough. If clients have questions regarding an invoice, they more than likely will reach out. To avoid lengthy delays you’ll want to have someone regularly checking the billing email inbox or answering the billing phone number. If you delay in getting an answer back to your client, then they start to build a case that it’s all right for the payment to be late.
- Accurate Dates – You should include the dates the work was performed, the date the invoice was issued, and the date that the payment is due. And these dates should be clearly visible and easy to identify.
- Invoice Payment Terms – Be sure to indicate what your business’ terms are. It can be easy to overlook and again, an omission of this type can give the client a reason to not pay. Also, be sure to list payment options. If you accept PayPal or Square for payments, let them know. This can help speed up the payment process too.
- Detailed Project Description – In truth, the project or work description can be as detailed, or not, as you want. However, it’s important to ensure that the client knows exactly what the invoice they’re paying covers. Especially for a job that may be invoiced in chunks, you want to be sure there is no confusion regarding what they have and haven’t paid.
The QuickBooks free invoice template has fields for all of this information. It even allows for you to upload your logo and choose a color scheme, so it can be tailored to your business and won’t look generic. If you don’t have time to look for a full invoicing software solution or are looking for a quick invoice generator, then you’ve just found it.
For more details about QuickBooks and how we can help small businesses like yours, please don’t hesitate to visit our Small Business Resource Center here.