Is Your Invoicing Impacting Your Cash Flow?
Invoicing is the dominant portal for incoming cash for most freelancers and small business owners. That said, not enough accounting teams consider invoicing’s impact on the cash flow of an organization when addressing finances.
Sound invoicing techniques can perform wonders when it comes to growing revenue and improving the financial outlook of your company. To understand the meaning of cash flow, think of it as the heartbeat of your business operations. The moment this falters, your business goes with it.
Not Sending Your Invoices On Time
A key mistake that novice freelancers and entrepreneurs often make is delaying invoicing. Once you’ve supplied the goods or provided due services, there’s no reason for delaying invoice generation and issuance to clients. In fact, as part of an agreement, some industries even dispatch invoices before the supply of services or goods and then follow up with a reminder.
Remember that your inability to process invoices on time unconsciously encourages your customers to do the same. Waiting too long before sending invoices can lead your clients to forget about the services, take out an off-cycle expense, or take your business for granted. With the invoice not fresh on their minds, there’s a great chance that they’ll either delay the bill or take an excruciatingly painful amount of time to clear it.
Sending Out Invoices With Mistakes
Another common factor resulting in delayed payments is processing invoices with errors. When clients receive invoices with incorrect information, they have the right to refuse payment altogether. Errors in the invoices could be the result of manual negligence but also a controversial practice of slipping in covert charges. These are charges that weren’t agreed upon between you and your client beforehand.
In either case, sending an erroneous invoice would likely cause your cash flow to suffer an unmistakable delay. This also puts the reputation of your business at risk and the client may be wary of engaging in future projects with your company. The best way to avoid invoicing errors is detailed recordkeeping. Manually, this can be cumbersome. Fortunately, with billing software, the process becomes a breeze.
Accepting Late Payments
Deadline leniency almost always results in payment delays. Clients that feel the assurance of late payments often see little reason to let the opportunity pass. Consider a client who has just received two invoices: one charges an agonizing amount as late payment penalty while the other offers no harm. Without a doubt, the invoice with a late payment penalty will get precedence every single time.
If you don’t wish to be at the receiving end of clients’ procrastination, start implementing some late payment penalties. Late payment penalties may not always be in the form of an additional amount charged. Other than a nominal fee, you can also include a refusal to resume services until the payment is cleared.
How To Overcome This
The right method to extract timely payments depends on the nature of your relationship with the client. Still, certain strategies can be universally applied to streamline cash flow.
Incentivizing On-Time Payments
Apart from dispatching payments on time, incentivizing on-time payments can be a great way to secure funds earlier. A reward strategy can completely counter any offset caused by common invoicing mistakes.
There are many forms of incentivization, but the most common of them is offering a discount. For clients who make payments immediately upon completion of service, consider offering a small concession. This strengthens your relationship and secures opportunities for future transactions.
Remember, offering a reward generally proves more effective than taking punitive measures.
Giving timely reminders to your clients keeps the thought of payment fresh on their minds. It’s more than possible, even for regular clients, to forget about an invoice amid the grinding operations of everyday business. Giving timely reminders not only keeps the thought of your payment afloat but concurrently instills a sense of urgency amongst your clients without causing any offense.
Several invoicing solutions such as QuickBooks Online, FreshBooks, and Tipalti can take up this load on your behalf. Invoicing software is usually programmed to generate and set up automatic reminders along with the intervals of your choice.
Ensure Easy Payment Methods for Your Clients
Your clients can vary widely in terms of preferred payment methods. Some clients prefer to use online payment services while others can insist on check acceptance. To secure early payments you must keep your options open. Many clients prefer making online transfers.
Once again, integrating your accounts system with billing software can facilitate an even smoother process for both parties. Many invoicing software solutions operate in partnership with more than one online payment platform. This makes it easier to receive payments from multiple clients via a range of platforms.
Mastering certain processes can skew invoicing’s impact on cash flow in a positive direction. In addition to promoting prompt payment, invoicing software can mitigate late payment trends and strengthen cash flow.
Ultimately, the right strategy is contingent upon your clients. Remember to always remain deferential while sticking to ethical invoicing measures.