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Getting paid on time for goods sold or services rendered is critical for small businesses that need to keep cash flow steady to manage their finances effectively.
Disrupted payments can lead to actively endangering businesses and sometimes negatively affecting client and supplier relationships.
While customers can often be the guilty party when it comes to late payments, businesses can help themselves by avoiding common invoicing mistakes that can hinder prompt payment.
Let’s examine a few invoicing tips and tricks that can help businesses get paid on time.
For many small business owners, invoicing can be a burdensome, repetitive task in which errors can easily be made. Here are some of the most common invoicing pitfalls that businesses fall into:
The number one tip for any business that wants to be paid on time is to avoid late invoicing. Some customers will try to put payment off for as long as possible, so a great first step is committing to timely invoicing practices.
Fortunately, this is where technology can give a real boost to businesses of all sizes. E-invoicing can relieve a lot of the pressure that comes with invoicing, automating much of the process by creating a system that promptly generates invoices with little input. These digital solutions can also track, transmit, and archive invoices – taking the responsibility for these tasks away from business owners, allowing them to focus on the doing the things that really make their business better.
Incomplete or inaccurate billing is a common reason behind delayed payments. While every invoice will be unique, there are nonetheless several pieces of information that are required to be provided as standard. These include:
Without accuracy on these points, payment schedules can be delayed. Carrying out error-free invoicing is a key part of ensuring customers pay promptly.
Businesses should set out specific payment terms that dictate how long after invoicing they expect to be paid. For instance, ‘Net 30’ means that clients have a 30-day period in which to pay the balance on their invoice. Another example is ‘15 MFI,’ which means that payment is due on the 15th of the month after the invoicing date.
Businesses should let their customers know that they have clear payment expectations at the beginning of every business relationship. Many new business owners find it awkward to discuss money, but nobody should be expecting services for free – being upfront about payment policies is just good business.
Effective invoice follow-up is an essential part of cash flow management. Businesses can decide not to work with late-paying clients again, but that does not help them receive payment for services already rendered. This also risks losing potentially good customers when other actions can prompt quicker payments and maintain productive relationships.
Though it might be tempting, never follow up on an unpaid invoice until the customer or client is already late. They have not yet broken the agreement, and harrying customers is a simple way of negatively affecting relationships and compromising return business. However, prompt reminders, which include the invoice and payment details, are acceptable – and businesses often choose to include late penalties. However, these must be agreed upon in the initial contract.
Of course, the more clients a business has, the more invoices they will generate. This inevitably complicates tracking unpaid invoices. Again, e-invoice solutions will keep track of accounts receivable, tracking payments and automating the follow-up process.
Many businesses still rely on using Excel, and the , to create invoices. However, digital invoicing solutions have evolved rapidly over the last few years, making it quicker and easier than ever for businesses to generate, send out, track, and archive their invoices. There is a vast range of different tools available that can cater for varying needs:
Invoicing software almost completely removes the human errors that can often lead to delayed payments. It ensures that all the required information is included, simplifies tracking, removes the risk of duplicate data entry, and optimizes the use of resources.
Popular invoice management tools include PayPal, who offer a free service, Xero, and QuickBooks. However, there are plenty of options available for customers. Depending on the business’s resources, the kind of invoice required, and how often they need to be generated, there will almost certainly be a particular solution that will be the best invoicing software for the business.
Switching to an automated invoicing system, such as , simplifies the process for both the business and the customer. After creating a template, simply enter the invoice specifics and details of who it should be sent to. The invoice automation software will deliver the invoice and even add in a ‘Pay Now’ option, so the recipient can quickly and securely pay the invoice.
Using this kind of streamlined invoicing system can lead to prompt payments and makes it easier for customers to pay.
Since the pandemic, remote and hybrid working have become much more common – with employers opting to hire staff from down the road or across the world.
Cloud-based solutions include all the same features as traditional digital invoicing software but are much more flexible and cost far less. These online invoicing solutions are available for a subscription fee. They provide instant access to the most up-to-date features, can often be integrated with other cloud software, and can be accessed from anywhere with an internet connection.
Invoicing is an unavoidable part of doing business. However, making it a uniform process can ensure it is carried out quicker, can reduce mistakes, and can let companies receive more timely payments. Here are some invoicing best practices that help businesses avoid a cash flow crunch:
Creating clear invoices that are well-structured and include all of the relevant information makes things easier for all parties. Helping customers understand exactly what they owe, when they should pay, and how to send payment will create a more frictionless process and play a key role in nurturing a positive business relationship.
A simple way of achieving this is by creating rather than generating a completely new invoice each time, saving pre-made templates that can be modified as necessary is easily achieved in either Excel or any digital invoicing software.
Overall client relationships are improved when each party is sure of the terms of their agreement. As such, professional communication is a key factor in any business relationship.
Anything agreed should be put down in writing – in a contract, an invoice, or even through a simple email. These kinds of client interaction and precise billing communication are easy wins for businesses trying to make sure they are paid promptly and on time.
Invoice reconciliation is the process through which businesses compare bank statements to invoices, ensuring they match with the appropriate book entries. Doing this regularly helps track billing accuracy, making sure that financial records are clean and that the books are balanced.
Many digital accounting solutions can automatically reconcile invoices, but for small businesses it can also be done manually. Typically, this is carried out by gathering the relevant invoices, creating a ledger of all payments, and comparing them with bank statements from the same period.
PayPal provides excellent solutions for small businesses looking to create invoices. is convenient, easy to use, efficient, and available at low rates that are only payable once the company is paid.
PayPal not only makes it easier to create and send out invoices, it also makes it easier for customers to pay. With PayPal, businesses can accept credit and debit cards, PayPal, Venmo, and even payment installments – even if the paying party doesn’t have a PayPal account.
Check out our invoicing resources or download our app to get set up and invoicing in minutes.
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