Improve your Business Invoicing and Get Payments Faster

It’s not uncommon for a business to fail within the first five years. When you look at this distressing fact based on research on small business success rates, you might dismiss it because your business is too promising to become a statistical casualty.

Unfortunately, an exemplary service or a product that desperately fills an unmet marketing need is not a guarantor of success. Other factors like a diligent team, excellent customer service, and an excellent marketing and sales process may also not be enough to ensure success.

The Achilles Heel of failure is something many business owners neglect — understanding and controlling their business finances.

3 Common Financial Problems

One reason small businesses have financial troubles is not always because they don’t keep up with their books. Many actually know how much money is coming into and flowing out of their business. Where they fall short is billing.

The billing nightmare can take on several forms. Here are three common situations:

• They may have to cope with negative cash flow because the customer has a 30 to 60 day credit.
• They may get too busy to get around to sending out their invoices.
• Their customers procrastinate on paying the bill or default on it.

7 Ways to Get Paid for Your Work

Let’s take a look at some ways to make sure you can get paid for your work.

1. Use factor invoicing

Sometimes, you may have to wait for payment while your own business bills are due. Fortunately, in circumstances like these, you can get an advance on the money owed by clients. This advance from a capital company is not a loan, but invoice factoring.

In the trucking industry, for example, where freight credit is the norm, a company like TBS Factoring uses factor invoicing to buy invoices from small trucking businesses. They then collect the money from the client when the invoice comes due. This way the trucking company can cover their overheads to stay in business.

2. Prioritize invoicing

As soon as you finish a project for a customer, send out an invoice. Don’t wait for a perfect day when you have enough time to go over your list of completed work orders and send out invoices. It’s only too easy to fall behind as your work piles up.

Invoicing is not a fun task. It’s boring and repetitious, but it’s necessary to get it done. Clients rarely send you a check and a thank you note without your sending out an invoice.

3. Stay organized

If you’re not completely organized with file numbers and a written record of what you’ve done, you can get overwhelmed and forget to send out a few invoices or invoice someone who has already paid.

4. Send out reminders

It’s not enough to simply send out invoices quickly and keep track of all your invoices. Customers may forget to pay. So, it’s important to set aside time to review your invoices and send out reminders.

5. Use electronic invoicing and accept electronic payments.

Using software or an invoice software service can help you keep track of your invoicing. You can even set up your software to send out automatic reminders when a certain due date has passed. This will save you time figuring out who has not yet paid and how late they are in their payments.

Often clients procrastinate on paying you because they don’t set aside the time to write out a check and balance their account. By using electronic invoicing, you also simplify the process for customers by offering an online payment option. In fact, customers often pay faster when they can simply put the payment on their debit or credit card.

6. Spell everything out.

Your invoices should clearly state when the payment is due. If, say, your customer has a 14-day credit, specify on the invoice that the date is when payment due rather than relying on the customer to figure it out. Also, provide information on the interest you charge for late payments.

7. Charge per project, not by the hour.

Organize your business so that you are not charging people by the hour but by the project. Borrow this pricing strategy from freelancers who realized that while an hourly rate simplifies the bidding process, it causes serious problems. For one thing, the better you get at your work, the less you earn because you will be doing it faster. Customers also tend to quibble over how many hours it takes you to complete a project.

Manage Your Numbers

You can be doing everything right in your business, but if the accounting is weak, your business may fail. Conversely, you can be doing most things wrong in your business, but if your accounting is strong, your business may succeed.

A classic example of this paradox is the story of the legendary Howard Hughes. Although Hughes left a $2.5 billion estate when he died, it was his first accountant, Noah Dietrich, who kept him solvent.

Dietrich, who later became the Chief Executive Officer, was responsible for the financial health of the Hughes Tool Company that served as the foundation for Hughes’ creative projects.

While Hughes was involved in many business ventures, from making movies to building cars and planes, some of his ventures were spectacular failures. It was Dietrich who kept the impulsive inventor from plunging into ruin when things did not work out.