Invoice management is a critical part of cash flow and inventory management. It helps the business to keep enough reserve of cash to avoid a disruption of services. Also, the customers’ profiles and records are essential for planning and strategizing purposes.
However, small businesses hardly have enough money to invest in invoice management systems. You need to put some extra efforts to streamline the process in the absence of these expensive tools. Here, we have mentioned some tips for small businesses to manage invoicing without spending hours on it.
1. Create a Checklist
An invoice contains many details about the order, customer, and your business. There will be miscommunication and dispute over the sent invoice if you miss any of the essential details. Therefore, you should start by creating a checklist of the required information on the invoice.
You can make the process super easy if you have an invoice from some competitor dealing with the same products. Also, there is plenty of invoice generator on the internet to get the job done. However, you need to make sure these invoices have all the details you want to share with the customers.
2. Set a Payment Schedule
The product and services don’t have the same payment schedule for every industry. You may charge them upfront, based on progress, or after the delivery. Based on your industry and customers, you need first to set a payment schedule and ensure the customers agree to it.
Small businesses can follow the interim model to manage a steady cash inflow until the project is completed. However, it is not always possible for the clients to either trust a new supplier or pay small amounts. You can apply for loans for small businesses to manage the finances until the clients make payment.
3. Use Digital Payment Systems
The world has moved on from cheques and cash to online transactions. It is time to provide your customers with the methods they want. These include online money transfer, credit cards, or even bitcoins.
Mention the methods of payment on the invoices as well to educate the customers. It will help you get the payments faster and from remote locations. If they want to pay in cash, send your representative or ask them to visit your shop.
4. Automate the Process
Automation reduces the stress from your head of invoice management to a great measure. It takes care of almost every aspect of the process, from invoice generation to payment reminders. You can use the time to focus on more critical operations in the business.
There are many software and online tools available to help small businesses automate invoicing. However, the pricing model and available features are not the same for every tool. Comprehensive research will save you some money and conversations with their customer care in future.
5. Switch to Online Invoice Management
As mentioned above, the online invoice management system provides plenty of features at a small cost. Another primary reason to use them is an increase in accuracy over paper records. You are wasting critical productive hours on writing down the invoice traditionally.
The accuracy is critical with the invoicing process. You cannot afford a loss of clients because of some mistake while writing down the invoice. Also, the records are easy to manage and find with the online system.
6. Keep an Eye on the Delays
Some common mistakes can delay the payment from the customers. You need to keep an eye on these small problems that can cost big. The person responsible should verify every detail before sending the invoice.
One major problem is unclear details or terms on the bill. You must ensure the client understands the details of the terms in advance. A small communication error means a severe delay from a few days to weeks.
7. Manage the Sent Invoices
The above mentioned scenario can do businesses to manage the already sent invoice. They might have to resent, cancel, or edit the invoice to remove the errors from it. Give a call to the client and apologise for the mistake as soon as possible.
The online system allows users to make changes in no time. You can send the edited file enclosed in an email within a few minutes. Simultaneously, the hard copy of a new bill can take some time before they reach the client.
8. Remind the Clients
It is okay to ring the clients if they are way past the agreed date of payment. You need to remind them of the payment and the late charges, if there are any. It is a standard practice in the industry that should not make you feel uncomfortable.
Calls are better than emails since they are hard to ignore and better at communicating the message. You should contact the right person as someone with no authority will only waste time. Give them some time if the reason for the late payment sounds genuine to you.
9. Reduce the Date of Payment
Many businesses have different payment schedule for their suppliers and customers. It makes no sense if the customers pay in two weeks while the suppliers require payment every week. This strategy makes the cash crunch inevitable at some point.
You should keep the payment time the same for both supplier and customers. Your cash reserve will only be used when the customers are running late. Also, offer some coupon or special discount to the customers for early payments.
10. Payment Agreement in Advance
To avoid delays and dispute, you should ask the customers for a payment agreement in advance. This may include the miscellaneous costs and the late payment charges. They will pay on time when the payment terms are clear.
This conversation takes place before the project is started. Do not wait for the project to finish for the payment conversation. Remember, payment disputes may result in less or no payment if the fault is yours.
Conclusion
To sum up, an invoice management system is essential for small businesses to keep a steady cash inflow. It will help streamline the payment process for the customers. Therefore, customer retention will improve, along with less financial setbacks.
