Any Business, big or small and even freelancers face the problem of Invoicing and late payments from their clients. This not only elongates the payment cycle but can leave businesses dry and delay their functioning. To avoid such situation, here are few tips on invoicing process best practices.
Invoicing Process Best Practices
- Automate Invoicing for results
Rather than sending out physical or manual invoices, businesses should focus on digitizing them. There are many cloud based platforms which help in digitization and are easy to use. Such tools can also help in setting up repayment reminder if the client has not paid the invoices.
For clients and customers with whom the business has regular orders, you can create a template which can go out on a recurring basis.
- Create a payment policy with Short terms
Businesses should prepare a payment policy with all the clients and every point regarding payment mode and time/duration should be mentioned clearly in it. For instance most of the clients pay in 30-90 days. It’s better to set short term of payment, for say 15 days from the receipt of the invoice. The payment mode should be mentioned clearly; the bank account where payment should come, Cheque payment, fund transfer or using a particular platform or service.
- Design Invoices to be clear and effective
Invoices should be clear and straightforward. Here are few ways of creating an ideal Invoice:
- Numbering the invoices
- Mentioning the address of both parties
- Mentioning the date of generation of invoice
- Writing the quotes for the work for which invoice is generated
- Mentioning the tax break-up clearly
- Mentioning the payment terms and conditions
- Mentioning the payment modes and options clearly
- Mentioning the incentive for the early payment
- Keep it professional and be polite
Businesses should thank their clients and add due dates, i.e. Request them to pay by that due date or within a particular duration from the receipt. One should be professional with even deadbeat clients, who haven’t paid in a long time. Every description and payment terms should sound professional and polite. It is important to respect your clients and show that you actually value business with them.
- Charge an interest fee for late payments
Interest fees can be a great way of getting payment on time, nobody likes to pay extra for anything. Charging an interest fees if payment gets extended from the due date or mentioned duration (as charted in the payment policy), ensures timely payments.
Businesses should also ensure that these additional charges are clearly mentioned in the payment policy and in the invoice as well.
- Offer incentives for early payment
What if you receive payment before due date? It will help you to accelerate your business cycle and you would like to appreciate the gesture as well. Award such clients by offering discount on present invoice amount or other incentives like offering store credit for your online store, gift coupons or percentage discount on future work.
- Have a process for following up
Businesses should also have a process for following up in place, once there is a delay it’s fair enough to drop an email or give the client a call asking for the payment. This process don’t need to be awkward or unpleasant, there are many automation tools to ensure the time-based sending of payment reminders.
Even when one is dealing with a hard client, the reminders or calls should be simple and non-dramatic, i.e handled professionally.
- Expand the payment options
Last but not the least to tap in the Fin-tech development in India and abroad, Businesses can also explore different payment services like Google Wallet, PayPal, Credit Cards, etc. Businesses can also tie up with various Platforms which provide Invoice Discounting services, to get their invoices discounted on the date of issuance.
All these tips are important for the proper invoicing process. Businesses or Freelancers might find few of them hard due to internal resistance but it’s important to realize that you are just asking for the payment for your services and nothing more. These tips are very simple and easy to implement. Try few and let us know how your invoicing processes change.
For saving your businesses from Cash flow crises, read on: How to Improve Cash Flow