Good invoicing is one of the most important things to learn for small businesses, yet many of these businesses come to this realisation after a mishap of some sort. The truth is, a business is meaningless without proper cash flow, and more businesses should see this as part of essential operations instead of an afterthought, a chore.
The more seriously a business takes it invoicing, the more promptly customers will be forced to follow up on payments as well. A business that has poor invoicing practices will have troubles with cash flow, and customers won’t have any reason to pay on time.
In this post, we’ll be discussing the essential accounting and invoicing tips for small businesses in the UK. Invoice practices do change from one business to the other. A retail business, for example, will take most payments in cash or card before goods are delivered. A services business, on the other hand, might invoice after goods or services have been delivered. Invoicing speaks volumes about your business’s professionalism, so make sure you take it seriously.
1. Use professional invoicing software
Using a professional accounting and invoicing software means you’re creating and sending invoices that are built to a standard. Excel invoices simply don’t cut it anymore. Your clients expect professional and sleek invoices, and software like Freshbooks can help you achieve just that without much hassle.
2. Prompt invoicing
Decide what’s the ideal time to invoice your clients in a way that increases your chances of getting paid on time. The best time to invoice clients is as soon as you have delivered goods or services to the customer. The importance and value of this is still fresh in the mind of the client, so they’ll be encouraged to make the payment promptly.
Some businesses work with clients through retainers, and that’s completely fine as well. In this case, a specific date should be decided and communicated to the client beforehand, so they know when to expect an invoice from you.
Knowing when to invoice clients will keep your business’s cash flow in a healthy state as you’ll know when the cash is coming in.
3. Set payment terms
Don’t forget to include payment terms with your invoice. You can’t expect every client to follow through promptly with payments unless they have an incentive to do so.
Surprisingly, it’s often the bigger businesses that struggle to pay on time, simply because the invoice has to go through so many people to get approved.
So a balance must be struck when coming up with payment terms. You don’t want too many terms that the whole payment process becomes bogged down because of them. But you don’t want payment terms that let the client get away with late payment without some sort of penalty.
4. Define accounting SOPs
Accounting software makes it extremely simple to manage the accounting and invoicing of your business. They allow businesses to automate these processes but to an extent.
Human input and intervention is still necessary, and for this every business should have defined SOPs to make the job as streamlined as possible. Having an SOP leads to fewer human errors, and someone can be held accountable if a specific part of an SOP isn’t followed.
5. Get professional help
Some small businesses do not have, or cannot afford full-time professional accountants to handle their book keeping and invoicing. In these cases a part time accountant can do the job, and this will take a significant burden off the in-house team’s shoulders.
Professional accountants are likely to do a better job, and availing even part time services can save you a lot of hassle and trouble. Having someone who can talk to departments, chase payments, verify paperwork and handle debt collection can be hugely beneficial and expedite the payment process.
6. Invoice the right person
Sending your invoice to the CEO of a company might seem like a good idea, but it’s really not. Your sales people might have closed the deal with the CEO, but that’s not someone who’s in charge of handling payments.
The point is, make sure you send invoices to the right person in the company. Mostly it’s going to be the company accountant. But just to make sure, ask your contact person who’s the best person in the company to handle payments.
By doing this, you’re avoiding unnecessary delays that might be caused in case the person you send the invoice to simply forgets to forward it to the right person.
7. Organise your invoices
Invoice organisation is hugely important for professional businesses. You can’t number your invoices willy nilly and expect your clients to respect you for it.
Instead, number and track your invoices so you can reconcile payments against them. Ask clients to pay against the reference number on the invoice so you can easily track payments in the future.
Of course, by using professional accounting software, you won’t have to worry too much about this. The tool will take care of this, and much more.
8. Flexible payment options
Businesses expect to have flexibility when it comes to payments. Offer your clients multiple payment options, so they can choose whichever suits them the best.
To start off, accept payment through all major credit cards and mobile payment processing services. Decide with the client beforehand as to who’s going to pay the processing fee.
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Also make sure to include instructions on how to pay you in the invoice. State the correct email address, location address, phone number and so on. If paying you is easy, your clients will be encouraged to pay you in a timely manner.