Small business owners depend on healthy cash flow to keep operations running. Poor cash flow inhibits your ability to pay your employees and vendors, as well as paying for inventory.
It may be tempting to blame slow-paying clients for this problem. If your invoicing method is ineffective, however, it can negatively impact your cash on hand.
Fortunately, having a business credit line can help address cash flow issues. However, the long-term goal should be to develop proper invoicing methods. This will ensure the payment process speeds up, improving your cash flow over time.
Create Easily Understood Invoices
Be careful with how you design your invoices. A tough-to-follow format could postpone payments, because what isn’t easily understood is usually pushed off until later. Create an invoice design that’s easy to follow, clearly displays your logo, and can be easily duplicated.
Your description of services, costs, and payment terms should be discussed at the beginning. Any surprises on an invoice will slow down your payments. Confused customers cause delays when they have to go back and forth with you to solve problems.
Make sure that it’s easy to locate your contact information. The best placement is at the top or near the payment amount. Include your mailing address, email address, and phone number.
Invoice Quickly and Accurately
If you send invoices with mistakes, your customers won’t pay them. By the time they contact you for an accurate one, it’s delayed your payment. Proofread everything to ensure it is error free before you send it.
Improve your invoicing accuracy by using automated software. These automated programs can track expenses and other important information as it relates to each customer. This lets you easily generate accurate invoices.
Waiting too long to send invoices increases the likelihood that your client will forget about them. Get in the habit of invoicing for services as soon as possible once they’re rendered. In some industries, it’s acceptable to invoice before delivering the product or service.
One way to improve your cash flow is by offering incentives for early payment. Even something as simple as a 5% discount can motivate people to pay early. Be sure to adjust your prices to ensure that the “discounted” price still satisfies your payment for services rendered.
No More Late Payments
We all have bills to pay, and everyone has obligations. That’s not a reason to accept late payments without consequence. If a late payment is unavoidable, penalties should be implemented.
Consider tacking on a nominal fee, or collecting a percentage of the balance owed. In extreme scenarios, you may have to stop providing services until invoices are paid. Charging fees has two major advantages: they’re a deterrent to late payments, and can cover the cost if you have to send the bill to collections.
When invoices are at risk for late payment, get ahead of the issue with reminders. Automated invoice programs can send reminders when the bill goes unpaid for a defined time period. Personal reminders also work, as does setting aside time weekly to review unpaid invoices.
Offer Easy Payment Options
Understanding how clients want to be invoiced and their preferred payment method streamlines the process. A digital process makes it easy for everyone. Send the invoice via email, which allows the client to easily pay online with their credit card. Getting money in your hands quickly safeguards your cash flow.
Effective invoicing goes a long way to keeping your company out of the red. If you still find yourself waiting on unpaid voices, consider invoice factoring. This allows you to sell unpaid invoices for a cash advance. Once the invoices are paid, the lender takes a small fee and returns the remaining balance to you.
ValueOne connects you with an array of financing services, including invoice factoring. No matter what your business needs to grow, we’ll be with you every step of the way. Contact us or call 855-960-5315 to learn more today.