Managing invoices is a crucial element to running your small business properly. This one simple process can make or break your business! If your invoicing system isn’t managed properly, this could end up costing you a lot of time and money. Not to mention, it can have a significant effect on your cash flow.
Getting the right system in place right from the beginning can make sure that invoicing runs with little intervention, keeping both you and your clients happy. Let’s take a look at some of the best ways to manage invoices as a small business owner.
Make Sure You Use the Right Type of Invoices
There are many different types of invoices that you may need to use, depending on your business and your customers. There are different types of payment plans or structures that your business may use, so it’s important to have different invoice templates prepared for every eventuality. Here are the three types of invoices that you should understand:
- Interim invoices: Interim invoices break down payments into smaller amounts, rather than making your clients pay one large lump sum. If you use interim payments, there should also be one final invoice that denotes the last payment.
- Recurring invoices: If you have ongoing clients with similar invoicing, it makes sense to send automatic recurring invoices. These are invoices that repeat based on agreed-upon intervals. This makes it easier for both you and your clients. Not to mention, it will help you get paid faster as clients get used to the timing of their invoices.
- Final invoices: Final invoices are sent at the end of a long project or a series of interim invoices. They should include all information about the project as a whole and a breakdown of all the past invoices.
Keep an Eye on the Payment Schedule
Right from the get-go, you should ensure that both you and your client agree on a payment schedule. If there is any miscommunication or confusion on this, it could throw a wrench right into your invoicing management.
An optimal payment schedule can even consider the right days to send invoices- clients are less likely to pay on Sundays, so why send invoices over the weekend?
Set up a payment system that works for both you and your clients. Keep in mind the different benefits of having different payment terms. For example, a shorter term is more likely to be paid late, but it will likely still be paid quicker than a longer payment term.
Use the Right Payment System
Nowadays, online invoicing is the way to go. Keeping things paperless is a pretty clear choice to most small business owners, but still- all invoicing systems are not created equal. Be sure to evaluate what invoicing software you decide to go with.
Ensure that it is able to send automated invoices and reminders, thank-you notes, and work together with your accounting software. Going with a sub-par invoicing system may end up leaving you with more work to do in the end.
Don’t Let Delays Go Unnoticed
Delayed invoices can cause a big problem for business owners. If you don’t keep track of invoices, when they need to be paid, and when customers need to be reminded to pay, you’ll end up spending hours chasing people down. The easiest way to cut down on delays is by automating your accounts receivable, and use other methods to cut down on delays!
It’s much easier for clients to make payments if they fully understand the terms of their invoice. Be sure that deadlines and expectations are well-communicated from the beginning. Next, any good invoice management system has an automatic reminder in place.
There’s no need for you or your employees to spend time reminding people to pay their invoices, at least not at the beginning. Put in place an automatic payment reminder at different times: before you send the invoice, when it’s sent, and when it’s past due. Many customers just don’t remember to pay their invoices right away, so a simple reminder can do away with big delays.
Here’s a recap of what we went over in this article:
- Make sure that you understand the different types of invoices and the different situations when you may need to use each one
- Don’t let your payment system fly under the radar! Stay on top of it and ensure that it is being followed properly.
- Consider what payment system and invoicing software you are using. The right system can make all the difference.
- Don’t let delays slide! Delayed payments take up a lot of your time and make cash flow difficult to maintain. Ensure that you have the right processes in place to follow up and keep delayed payments to a minimum.
Many small businesses don’t realize just how important invoicing is. In fact, it’s one of the central systems that the rest of your business depends on. If your invoice management is on point, the rest of the business will follow!
Similarly, if your invoice management isn’t properly set up, it can affect many other areas of your business. Using a system like InvoiceSherpa to automate and organize your invoicing system can help you stay on track easily and without taking up way too much of your time. Try it out today with a 14-day free trial!