In these tight times cash is king. And when it comes to cash, timing is everything. ROD DRURY suggests ways your company can keep on top of cashflow.
Invoice immediately
Many businesses wait until the end of the month to do their invoicing. Invoice as soon as you have completed the job. If you wait 10 days to invoice then that’s 10 days that you have no chance to get the cash.
Another good practice to get into is to make sure that the customer is happy when you are finished the job and ready for an invoice. You can simply ask them:
“Are you happy with the job?”
“Yes.”
“Can I send you an invoice?”
“Ah, yeah, sure.”
This creates a personal obligation and the customer is more likely to pay.
Email invoices
Most people have email addresses and they check their email frequently. If people receive a bill in the mail it may take them a few days to open it. Bills received in the mail are easier to ignore.
Invoices received over email get seen by the owner and they are more likely to act on it. Emailed invoices are also more environmentally friendly so they are difficult for businesses to refuse
Write detailed descriptions on your invoices
Many customers dispute invoices – often just to delay payment.
Use the description field in your invoicing system to write a full account of what you did. This reduces the ability for someone to dispute a bill and they can see all the things you did in the time spent.
Providing a detailed description of your work allows the customer to see the value they received, and they’ll feel better about paying.
Setting your own payment terms
It’s convention that people pay their bills on the 20th of the following month, or 30 days after invoice, but you invent any payment terms you like. Set the payment terms before you provide the goods or services.
Put your payment terms on your website, on quotes sent out and make sure the terms are clearly set out on your invoice template.
You might say: “Please pay on invoice” or “Payment required within 7 days” or “Payment is due on completion”.
Don’t feel bad about being paid quickly. Essentially you’re funding your customers business until you get paid.
Encourage direct payment to your bank account
Many business owners get annoyed when invoices are received without bank payment details. That means they need to write a cheque, label an envelope, find a stamp and put it in the mail. Often they just park the invoice.
If a customer is having cashflow problems they may send you a cheque knowing that they’ve bought themselves a few days. Cheques you receive cost you time and money to process.
Always put your bank account details on your invoices so that your customers can pay you easily and quickly.
Mobile phone access to accounting by day
Many business owners work hard on their business all day and do the books at night. If you are reviewing your accounts at 9:30 at night you can’t ring customers to ask where their payment is.
Most high-end phones can now access the Internet allowing you to see if money has been received. You also have access to phone numbers of people you are chasing so you can contact them between jobs.
Set aside some time in your normal working day to make a few phone calls to chase down bad payers.
You can see a version of this article which includes demonstration videos on the Xero website. And go to the BT Business Xero page to find out more about the service and what it can do for you.
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