No matter the size or type of your business, it is vitally important to get the cash in on time to make the payments out on time. If you don’t have the incoming cash to pay out, your business can be severely disrupted, or simply grind to a halt with damaging repercussions.
However, what is perhaps even more unfortunate is when you have a business that you know is profitable – the numbers add up, you have the skills for it, perhaps even others are doing it, and you enjoy the challenges – but due to factors that seem outside your control the cash just isn’t always coming in on time. Ironically, this situation can be driven by sudden growth – stressing your capital and human capacity to gear up quickly. It can also be caused by seasonal volatility or hidden issues in stock management.
A recent survey conducted by online accounting software Xero suggested that small businesses’ number-one mistake was not having ongoing insight into their cashflow, and getting bogged down with chasing their customers again and again.
Not only is this distracting, it is a waste of valuable time that reduces the profit margin of the products and services sold.
To prepare for the coming end of financial year, here are 10 tips that we’ve compiled to get your invoices in order with help from the Xero community.
Ten tips for getting paid quicker
- Set your own payment terms, including invoicing dates and due dates, which take into account that there will be late payers.
- Be clear with your customers about your terms. For example, you may require a signature on estimates, and include due dates in every written communication with your customer.
- Inquire about your customer’s payment cycles before engaging and ask them if they want to be invoiced 100% upfront. Sometimes they are trying to push through allocated budget towards a quarter-end or year-end and this structure is welcomed.
- Keep a detailed record of the services done or products supplied including any inventory used and time to be invoiced.
- Make the invoice absolutely clear and easy to understand to the person making payment.
- Address the invoice to the person making payment. Ask for a secondary contact in the event that the primary contact is out or on vacation.
- Invoice as soon as possible after, or as, products and services are supplied.
- Try using overdue fees or prompt payment discounts.
- Have a timely system of reminders, monthly statements and phone follow-ups.
- Use online accounting software, such as Xero, which connects with your bank account and makes it dead simple to see what money is coming in, what money is going out, and tracks the ‘baddies’ with overdue payments.
With help from over 1000 small-business people and insights from analysis of over 12 million invoices, Xero has created a guide to invoicing and payments for small businesses.
Find it at www.xero.com/guides/invoicing
Xero
