To get paid quicker, you have to get your invoices out to customers in good time and in good shape otherwise you risk ongoing cashflow difficulties that could hurt your business.
We recently saw a business where, because of system changes, one month’s invoices to clients went out very late and they almost failed to be able to pay their staff at the end of the next month.
It seems that however well-organised you are with invoicing, even a small glitch can have a disproportionate effect on cashflow.
So, if sales invoicing is so important, how do you make sure you get paid quicker?
1. Get the basics right
Make sure you have an agreed contract or agreement with your customers and that it included terms of payment and, perhaps, a payment schedule if it is for a distinct project.
Are your invoices:
- professional-looking, accurate (no surprises for the customer, errors can delay payment)
- sent to the right person
- correct for details such as Purchase Order number if required
- sent out in good time.
If you know that your client requires two signatories on an invoice greater than £50,000 then why not send them two for £25,000?
Get the basics right first time, every time.
2. How to create invoices to get paid quicker
There are four common ways for a business to create sales invoices:
- Use your accounting software. The creation of the invoice does the accounting at the same time, so there’s no duplication of effort.
- Use a CRM system – in which case make sure you have software to send the invoices from your CRM system to your accounting software
- Use a sales invoicing app
- Word, Excel or similar. A spreadsheet is better because it will add things up and calculate VAT properly. However you do it, convert them to PDF before sending them so they can’t be changed.
However you create your invoices, make sure the basics are right.
3. How to send invoices
Invoices get sent electronically, no ifs, no buts.
There are two alternatives, one good, one bad.
The good alternative is to send your invoices as PDF attachments to emails, making sure your email goes to all parties that need to see it. Taking away yet another excuse not to be paid!
The bad alternative, but championed by some accounting software providers, is to send an email containing a URL link to your customer.
I think this is nuts! Why make it more difficult for your customer to deal with your invoice?
Sending the URL is simply creating a reason for your invoice not to be paid as it makes your customer have to do a bit more work which they might conveniently forget to do.
4. Make it easy to get paid quicker
Try to use a direct debit service such as GoCardless.
This will take away almost all of the pain of getting paid.
Sign up all new clients to pay by direct debit and be very wary of any prospect that won’t do so.
If direct debit is not an option then your invoices should contain the details of how you want to be paid.
Direct bank transfer, such as BACS, is best and therefore you MUST include your bank sort code and account number on the invoice.
If your client is overseas, further details such as your IBAN will be required and part of getting the basics right will have been to use the correct currency for the invoice in the first place.
Every sales invoice is part of your credit control process and it must help, not hinder being paid.
5. Systemise your sales invoicing process
Like many business processes, sales invoicing should be turned into a documented system that can be run in the same way every time and produce the same outputs. Make sure more than one person knows how to run the system so that holidays and staff changes don’t mean invoices are not produced.
Sales invoicing becomes more efficient, less prone to error and clients come to expect your invoices to arrive at the same time and in the same way each month, which helps you to get paid.
Where you send recurring invoices of the same amount to the same clients each month, use your accounting software to set up and email recurring transactions (e.g. memorised transactions in QuickBooks) so the job is done for you and not overlooked.
Also, your accounting software should be able to send automated chasing emails to customers that owe you money – but get on the phone as soon as an invoice is late!
There’s no reason to be poor at sales invoicing and the positive impact on cashflow means that you have one less thing to worry about.
Michael – @bluedotmichael