Believe it or not, one of the biggest reasons startup companies, including freelancers, fail within the first year is not having an effective invoicing system in place. Even large and successful companies often struggle to streamline this part of their business. The following tips will help you implement efficient invoicing practices that can help you realize your revenue on a more consistent and cost-effective basis.
First and foremost, invoices need to be promptly sent upon the completion of services or delivery of goods. When invoices arrive late, it sends a strong message that you are casual when it comes to getting paid. Furthermore, your customer’s budget to pay you can disappear; even if the recipient initially had good intentions of paying you, delaying your invoicing might mean missing your chance to get paid any time soon.
To help you send invoices in a timely manner, try setting reminders to automatically remind you to send invoices. This will get your company in the habit of sending them out quickly.
Some companies also find that they have more success with getting their invoice paid promptly when they send the invoices by both post mail and email. This can help tremendously since most customers will periodically change email addresses or move to a new physical location.
Research shows that most invoices are read quickly and immediately upon receipt. Your customer should be able to quickly scan the invoice and see all the most relevant information. That means clearly identifying that it’s an invoice, how much is due, when it is due, and how to make a payment.
Before you provide services or deliver goods, the terms of the deal should be clearly understood by both parties. If customers routinely feel that transactions with you didn’t occur as expected, it’s easy for disputes to pile up and payments to stall.
After communicating your terms and policies, you need to stick to them. On your invoice, refresh your customer’s memory by including the repayment terms and instructions and the penalty for any late payments. Communicating penalties ahead of time is a fair and common way of incentivizing people to repay promptly.
Furthermore, make payment as easy as possible. That may mean, depending on your business type, accepting many different methods of payment, such as:
Including a return envelope with your address preprinted on it can also go a long way to speed up repayment.
If payments are routinely received late, you may have to adopt different policies. For instance, you can require an initial deposit before starting any work and/or require full payment before finishing any work. These tactics are especially effective for freelancers and can provide useful revenue on the front end of projects. Furthermore, also allowing customers to make partial payments instead of only lump sum payments can smooth out your cash flow and make it easier and more manageable for your customers to repay.
It may sound obvious, but you’ll need to get away from simply using handmade spreadsheets to track your invoices. A dependable and effective software system will quickly pay for itself in the money it saves you by making your invoicing process more efficient. Just the time saved can bring about huge savings.
Does your invoice have a lot of empty space? If it does, you’re probably missing out on important advertising opportunities. Since you’re going through the time and trouble to send something to your customer, you might as well provide them additional information about your products and services.
This type of cross-selling also helps remind your customer that you have more to offer and to consider your services again in the future.
Lastly, just as you need reminders to send invoices, your customers probably need reminders to pay them. For this reason it’s a good idea to send a reminder to your customers a few days before invoices are due. This also will help prevent customers from making excuses when payment is late.
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