One of the hardest parts of running a small business is managing your money. From tight budgets to cash flow problems, keeping on top of your finances takes a lot of hard work. To make matters worse, a huge number of entrepreneurs face difficulties when it comes to getting paid for their services. This could be due to clients paying them months after a job has finished or as a result of poor communication, but whatever the reason, improving upon your invoicing process will help you to iron out any issues.
If you’ve never put much thought into the way you create and send out invoices, there’s probably a lot you could change. Don’t worry, these simple tips won’t take too much time or effort, but they will allow you to streamline your payments process. Getting the money you’ve worked hard for will soon be easier than ever.
Use invoicing software
Managing the invoicing process yourself can feel very manual and time-consuming, which is why lots of small businesses turn to invoice software for help. Invoice software can be linked to a broader accounting software package, allowing you to organize all your financial information in one place, but even on its own, it can transform your day-to-day practices.
The right invoicing software will automatically generate and send out invoices to clients as well as send them reminders if they haven’t paid. You’ll also be able to choose a template for all your invoices to give them a clean, professional look. While you can create your invoices yourself, templates are usually clearer and easier to understand, helping you to get your payments more quickly.
Establish payment terms
Invoices aren’t just about the total a client owes you, so make sure that you include all your payment terms alongside any charges. If you’re unfamiliar with the concept, payment terms are essentially instructions or conditions that need to be followed to finalize your transaction. Common terms can include:
- A payment deadline and penalties for lateness
- Accepted payment methods
- Additional fees or charges
- Returns policy (if applicable)
It’s best to keep all your payment terms concise so that clients can understand them easily. Having a long, complicated list of terms will only cause frustration, so stick to the most important points to get paid more quickly. You should also avoid changing your payments terms too often, as returning clients will get confused and may make mistakes. If you do need to change your payment terms, send a separate e-mail detailing any changes so that they’re clear for everyone involved.
Be flexible about payment methods
While it might seem easier on your end to only give your client one or two ways to pay, in reality, this will only prolong the whole transaction. Effective invoicing is all about making it as easy as possible for customers to make a payment, so it’s important to be as flexible as possible. While you might be unwilling to accept cheques by post, it’s never a bad idea to offer multiple types of card payments as well as the option of a bank transfer. Services such as PayPal and Stripe can also make payments easier, though you need to watch out for transaction fees and factor them into your pricing.
Send polite reminders
Your clients are sometimes just as busy as you are, so it’s only natural that paying an invoice might slip their minds from time to time. While your accounting software may send automated reminders, it’s never a bad idea to send a more personal reminder to a client who is particularly behind on payments. It’s harder to ignore an e-mail that’s been handcrafted by a real person, especially if it’s well worded and polite.
No matter how frustrated you are by your client dragging their feet, it’s important to remain professional. This doesn’t mean you can’t highlight any fines they may have incurred as per your payment terms, but it does mean being respectful and mindful of your tone.
Keep careful records
It can be tempting to forget about an invoice once it’s been paid, but keeping track of past transactions is crucial to running your business successfully. Not only will your records make it easy to look into problems in the future, but you’ll have a lot less work to do when tax time rolls around. Whether you choose to use accounting software or not, having all your invoices to hand will make it much easier to submit evidence along with all your tax forms.
However, this doesn’t mean you should only keep your invoices around for a year. Sometimes tax questions crop up five or even ten years down the line, so you’ll be glad to have them safely filed away in these instances.
Ask for a deposit or upfront fee
If you’ve been having problems with your cash flow as a result of clients paying you too late after the completion of a project, ask for a percentage of the total amount before you begin work. If you’re using payroll software, it’s easy to ask for payments to be made in installments. What’s more, once the total amount has been paid, you can even draw up a summary that details when each payment was made should your client have any questions.
You can also send out extra invoices if your client asks for more than what was originally agreed upon. Instead of amending the total to be paid at the end of the project, ask them to pay a small sum as soon as the new terms are signed off.
Update your invoices today
While you might be thinking that your invoicing process needs a complete overhaul, it won’t take you too much time to make the small changes listed above. Remember to work through these tips individually to avoid getting overwhelmed and find a good template or software package to make your transition even easier. There’s no guarantee that clients who are notoriously late on payments will change their ways, but there’s a good chance you’ll see an improvement across the board.
