How well does your invoicing process work? One way to know is to determine if your clients are paying your bills on time.
If you're struggling with getting on-time payments from your clients, then it's time to review your process (and make some changes).
But what should you do to create the perfect invoicing process?
Here are 11 simple steps you can take.
1. Detail Your Payment Terms
What are the rules you'd wish your clients to follow when doing business with you? This is where you get to lay down the ground rules for your working relationship.
There are several things you should include in your payment terms to clarify the expectations of both parties. For example, you should clarify when the client can expect their project, how many revisions they get before being charged extra, how much additional fees are for more revisions, and when you'll send out the invoice.
Then you'll need to determine when the invoice must be paid. Some companies decide to do a Net 30, which means your clients will have 30 days to pay their invoice.
Other options include Net 7, Net 10, Net 15, Net 20, and even Net 0 (meaning due upon delivery).
You also need to clarify if the timer begins on the delivery of the project or the day you send your invoice. Not clearing this up can lead to mass confusion about the due date of invoices, which means more late payments for you.
2. Send Invoices Quickly
Consistency is the key to running an efficient business. When you start a new business relationship with a customer, you need to set a foundation of consistency.
This includes sending invoices quickly (preferably the same day). In doing so, you will develop a pattern your clients can learn and accept.
They'll know when to expect to receive your invoices and when they're required to pay it.
3. Learn About Your Clients
Not all clients are the same. So learn all you can about prospects before working with them.
You can ask questions over the phone (interview style) or give out questionnaires for them to fill out.
This is an excellent time to learn about their finances, what they're capable of paying, and the methods of payment they prefer. This information can spell out potential setbacks that may arise when invoices roll around.
Ensure you accept the forms of payment they want to use. Otherwise, you'll need to negotiate a workaround. It's also good to find out about their financing department to see if they prefer to pay monthly vs. bi-monthly or weekly.
4. Design Detailed Invoices
Your invoice should clarify key details to help your clients know everything they need to make a payment promptly. For instance, you should have a logo at the top, along with your name, business name, address, and phone number.
You want your clients to know immediately who the invoice is from, who they can contact, and how. Then you need to have other essential information, such as line items for what you're charging.
Include the name of the product or service, a brief description, the rate, and a subtotal at the bottom.
If your payment terms include late fees, then you can tack this on to the subtotal. Just be sure to clarify the late fee charge so they can see why the price is different than what you quoted.
Also, if you struggle with making professional-grade invoices, there are tools you can use, such as invoicely.
5. Consider Invoicing More Frequently
It's great to be flexible with your clientele, but you need to maintain consistent cash flow. So it may not be feasible for your business to operate on a Net 30 schedule.
In this case, consider invoicing more frequently, such as on a weekly or bi-weekly basis (depending on the service).
This is the way to go if you have clients who are chronic late payers. Dealing with slow payments and late payers is a quick way to run your business into the ground.
6. Send Out Payment Reminders
Your clients are people, not robots. So you can expect them to forget about your invoice, especially when you give them weeks to pay it.
To help ensure this doesn't happen, you should send out regular payment reminders.
The only issue is you're also only human (who can forget). To counter this, you can use an online invoicing platform to set up your payment reminders.
Automating the process is a smart way to ensure no one forgets payments on either side. With online invoicing software, you can see which invoices are paid and which are still pending.
7. Accept Online Payments
You'll find most businesses today making payments using credit and debit cards or payment portals like PayPal. If your company doesn't accept these forms of payment, then you could find yourself in a bind.
This is one reason we suggest hashing this out in your payment terms.
To make it easier on your clients, you should find a way to allow online payment processing. A simple way to do this without dishing out loads of money on your own payment gateway is to adopt an online invoicing tool.
When you email your invoices, your clients will be able to pay it right then and there.
8. Send Personalized Emails
Maybe your client isn't used to online payments and needs a little help. Rather than reaching out to your right away, they put your invoice off to the side to pay later.
Problem is, it could take weeks before they come back around to it.
So it's ideal to send out an email a few days later to make sure they don't need assistance. You can send this before the automated payment reminders roll in.
9. Don't Forget About Late Payments
The day you stop pursuing late payments is the day you allow your business to sink into the ground. You have to treat late payments as what they are -- payments owed to your business.
You need to maintain a steady flow of revenue to stay afloat. You can't do this if you allow clients to get off the hook without paying.
Or worse, continue extending credit to clients who are already behind in payments.
Have a process in place for making attempts to collect what's owed.
10. Give Incentives to Pay Early (or Penalties)
In your payment terms, you should cover how you'll handle late payments. Are you going to be proactive or reactive (or both)?
The proactive method is to offer an incentive to clients for making their payment early. For example, a 5% discount for paying within 7 days.
The reactive method is to charge a late fee once the due date passes. There are different ways you can set this up. For instance, you can have a percentage accumulate over time.
Or it can be a one-time charge. Make sure the penalties are fair and reasonble. If it gets too high, then you dig yourself in a hole. Clients aren't going to pay 10x what you quoted because of a delayed payment.
So it's a choice between getting paid late or not at all.
11. Choose a Quality Invoicing Platform
You need an invoicing tool you can rely on to create and send professional invoices. There are various tools you can use, such as invoicely.
This platform comes with templates to choose from and the ability to upload your logo. Your business data and client details are saved, so you don't have to insert them each time you create a new invoice.
The payment reminders and the dashboard make it easier to manage your invoices in real time. You can see which invoices are yet to be paid, along with how much your business has earned over a month, several months, or the year.
Make sure the platform you choose offers multiple forms of online payment. Invoicely allows clients to pay using credit/debit card, PayPal, WePay, Mollie, and Stripe.
These are leading payment portals used by many businesses across the world.
Begin Crafting Your Perfect Invoicing Process
You're a business professional -- it's time to create a professional invoicing process. As you can see in this list, you're only 11 steps away from setting up the perfect system.
Of course, this isn't an all-inclusive list. You can tie in other methods with these to help make your process more efficient.
So what is your current process for invoicing and how do you plan to change it in the future?