Businesses tend to face trouble with invoicing and late payments from their clients from time to time. Not only does this slow down the payment cycle, but it also affects the business’s functioning, operations and often, its very survival. Here we have collated a few tips from experts that have been proven to work in setting up an efficient invoicing process.
Tips For Effective Invoicing
1. Automate invoicing
As entire industries and companies go digital, it is only logical to move with the times; out with the old and in with the new! Switch to digital invoicing rather than sending out physical or manual invoices. There are several cloud-based easy-to-use platforms which can assist in this. Create a template for regular clients that can go out on a recurring basis. In addition to helping in setting up payment reminders to ensure that clients pay on time, such tools also improve efficiency and reduce a business’s carbon footprint.
2. Create a payment policy with short terms
Prepare a payment policy keeping all of the business’s clients in mind clearly mentioning every point regarding payment mode and time/duration. For instance, most clients pay in 30-90 days. Rather than opting for a 90th-day payment, set a shorter term of payment of 15 days from the receipt of the invoice. Also, remember to mention the preferred payment mode; the bank account to which the payment has to be made and whether the client is required to make a cheque payment, fund transfer or a platform or service that offers early payments in return of discounts on the invoice such as an invoice discounting platform.
3. Ensure that the invoices are clear and effective
The ideal invoice needs to be simple, concise and straightforward. Create an effective one using the tips mentioned below:
- Number the invoices
- Mention the address of both parties
- Mention the date of invoice generation
- Mention the quotes for the work for which invoice has been generated
- Mention the tax break-up clearly
- Mention the payment terms and conditions
- Mention the payment modes and options
- Mention the incentive for early payment
4. Keep it professional
When sending invoices to clients, thank them for the business and add due dates, i.e. Request them to pay on or before the specified due date. Be civil and courteous with even deadbeat clients who haven’t paid in a long time. It is important to respect your clients and show that you actually value doing business with them.
5. Charge interest fee for late payments
Charging interest fees can be a great way of receiving timely payments because nobody likes to pay extra. State this clearly as a clause in the payment policy and in the invoice as well.
6. Offer incentives for early payment
Early payments from clients can help accelerate the business cycle. Award clients who pay early by offering them a discount on the invoice amount, a mechanism popularly known as invoice discounting, or other incentives like offering store credit at your online store, gift coupons or percentage discount on future work.
7. Have a defined process for following up
It is imperative to have a process for following up. Once there is a delay it’s perfectly okay to drop an email or give the client a call asking for the payment. It doesn’t have to be awkward or unpleasant as there are many automation tools to ensure the time-based sending of payment reminders. Even when one dealing with a hard client, keep the reminders or calls simple, non-dramatic and handled professionally.
8. Tap into the fintech landscape for payment options
Businesses can explore different payment services like Google Wallet, PayPal, Credit Cards, etc or tie up with various platforms which provide Invoice Discounting services, to get their invoices discounted.
KredX is one such invoice discounting marketplace helping businesses gain access to working capital in 24-72 hours by selling their unpaid receivables. To know more about the offering, please drop us a line at firstname.lastname@example.org or watch this video here.
Though businesses may be hesitant to employ some of these tips due to internal resistance, it is important to realise that having an effective invoicing process is essential to the very success of the business. Try these simple and easy-to-follow tips and let us know how your invoicing processes change in the comments section below.