Invoicing can be the bane of a small business owner or solopreneur, so much so that it's relatively common for businesses to lose money because bills were either incorrectly sent out or never generated at all. In fact, an estimated 82% of small businesses fail due to poor cash flow management. If you're getting tired of keeping track of who owes what, there are ways to start organizing it all. For a full guide to email management, click here. For standard tips, keep reading below!
1. Invoicing Takes All Kinds
If there was an easy way to enable invoicing, no one would struggle with it. But the problem is that each company has its own way of doing business, and their way is likely to clash with yours. Maybe their IT doesn't allow for electronic payments or they only send checks out one day a month. If you're going to compromise to clients, it may mean exploring a number of processes before narrowing it down to one.
2. Focus on Estimates
Accountants can throw all kinds of fancy terms at the problem, but paying an invoice is always hard for your clients because they're looking at their own bottom line. When you make use of estimates before you send the first bill over, you have documented evidence that the client understands the full scope of the work. If things change along the way, updating the estimate provides proof that changes were made and agreed upon before taking place. This is a tough practice for many small business owners because projects can feel fluid in the moment, but few clients are as flexible as they lead you to believe when it comes time to pay.
3. Break It Down
Limiting the number of late payments from a client may mean sending more invoices. With interim invoicing, a client can pay in smaller increments either after a set amount of time or after certain phases of the project are completed. With the system, you don't have to take on the risk of losing the full fee (or even half) plus the time it took to complete the job. Plus, the client may be more likely to settle the bills if they're spread out.
4. Automate Your Invoicing
If bills come in at different times, it can increase the odds of a mistake — either on your part or that of the client's. It's usually more effective to send bills every week or every month, so both parties can get used to having a set schedule. Even if you're only doing work for a short period of time, having a routine can work wonders by establishing expectations right off the bat. Automation makes it possible to generate and send bills without having to keep track of each individual client.
5. Assess Automation Software
When it comes to the best types of invoicing software, different kinds of businesses may work better with different platforms. FreshBooks and QuickBooks scored high marks for affordability and user-friendliness, but those with lower volumes may prefer Square Invoice. Some select Hiveage due to their expanded number of payment options. Finally, if you love your invoicing reports, software like Sage can help you track where each penny is going. Automation software is designed to integrate with your current systems to speed up its adoption.
6. Consider Your Template
The template matters when it comes to how your invoices are paid. Typically, you discover this quickly if you're seeing delays due to missing information or over clarification of each line item. However, even if you're not getting a lot of pushback, that doesn't mean you should assume it's telling clients everything they need to know. At the bare minimum, you should be including your contact info (including address receiving a physical check), tax ID, hours worked, and a break down of the tasks you've done.
7. Plan Ahead of Time
Billing takes more mental time and energy than small business owners think, and even the sharpest minds may find it difficult to remember it all. As painful as it can sometimes feel, it's always better to update as you go rather than letting it build up until the end. This can help both you and the client clarify the charges, so there are fewer miscommunications along the way. This tip can especially help you maintain relationships because the client feels like they're getting what they paid for.
8. Develop a System to Edit Invoices
Whether they need to be resent, changed, or canceled entirely, you should have a process for managing invoices after they've already gone out. If you're using automation software, you'll generally see these options on the dashboard. If you're working with a free program, such as Google Docs, you'll need to organize your invoices so you always know which have been settled and which are still open. As it is, it takes about 21 days for small businesses to be paid. You don't need the number to go up if you can avoid it.
9. Hire a Virtual Assistant
A virtual assistant is someone who can keep track of your invoices so you don't have to. Even the best automation software can't account for every potential mishap, and even if it did, you'd still have to detail where all your time goes. A virtual assistant can send bills to each client, clarify jargon if there's confusion, and follow-up with clients if they miss the deadline. The money you spend on a virtual assistant can be a profitable investment because it means you're more likely to get paid on time and in full. See how it works with Delegated.com, or check pricing.
10. Send Reminders to Clients
Your client's invoicing strategy may be worlds apart from yours but that doesn't mean you can't come together somehow. Sending reminders to clients can be an efficient way to give them a heads-up as to when the due date is and their options for paying. Remember that your client may have dozens of other companies they're working with, all of whom are sending their own invoices. This merely reinforces how crucial it is to establish control from the beginning.
11. Stand Firm
Speaking of establishing control, your job is to be professional and polite with your clients at all times but to stand firm on your contract. If you let clients slip a few times by paying invoices late, you set a dangerous precedent that this is acceptable behavior. Let clients know that the work can't progress unless everything is paid on time, and that the project may be delayed or canceled altogether if there's a recurring problem. As distressing as conflict resolution can be, it can also lead to better clients who understand the value of your skills.
12. Use Invoicing for Forecasting
Invoicing can be a tool to unfold the story of how, why, and when you make money. While some spikes have obvious causes, not every small business owner notices the trends until they actually sit down and run the reports. You'll see where the troublemakers are in terms of clients and how different strategies impact your payments. If you're trying to keep enough inventory on hand, invoicing will also give you an idea of how much you'll need to meet demand.
No matter how good your invoicing system is, it will never fully account for clients who drag their feet on fulfilling them. It's just one of the reasons why invoicing can be nearly impossible if you don't have someone with specialized skills. Combining automated software with a virtual assistant can lift a burden off a small business owner or solopreneur who struggles with their billing communications, leaving them with far more time to actually do their jobs.