Surprisingly, many small business, and maybe yours, are making it hard for your clients to pay, improper invoicing can slow payment, which could bring your whole operation to a halt. You may even get much less than you expected, simply because the client found a hole in the deal. The following ways can help you improve your invoicing and keep your company healthy.
Short Payment Terms
Stay away from 30-day payment terms as they aren’t good for your business. Those kinds of terms mean you wait an entire month for your revenue and this increases the amount of capital your company needs to function, because you don’t immediately recoup your expenses. With today’s technology, you don’t need to wait that long. You can email the invoice and many accounting programs allow the receiver to just click a button and pay. There’s also e-Interac®Transfers, online banking, and credit cards. In this day and age there’s no real need for payment terms anymore. Always, encourage your customers to pay right away, or better yet, prepay.
Bill Clients Regularly
Your business is probably like most that you can get away with requiring payment right away. If you’re in a situation where that’s not possible due to the nature of your business or clients, you will have to determine when you should bill your clients. There’s no one set of rules that apply to all companies, but there are some best practices, so check with others in your industry and see what they’re doing, and those practices may depend on the region you’re in.
No matter how often you send invoices, shoot to send them when their inboxes are less full, like a weekend. Barring that then Tuesday is usually the best bet.
Invoicing can be a time-consuming, though albeit very important, task. Rather than slaving away at your invoicing, you should automate it as much as you can. The time savings allows you to work on other aspects of your business, especially if you have recurring invoices. As we work on a value-based pricing model, we bill out the first of the month, and apply to a credit card, and thanks to QuickBooks Online this makes it very simple.
Set Your Payment Terms in Stone
Before you even sell your product or service you need to set your payment terms in stone, too many small businesses make this mistake when starting out. Without clear rules, either party could start trying to get more out of the deal, possibly hindering the process or turning it into a worthless endeavour. Every contract should answer things such as payment options, invoicing, as well as any other incentives.
Never Hold Credit
Once you spend your money, you’re not getting it back until you get paid for your product or service. By holding credit, accounts receivable, for your clients, you’re putting your business in pickle. Holding credit can impede you from meeting orders, and if you don’t get paid on time, it could affect your relationships. Your suppliers may not look favourably on your business if you can’t pay them. Ensure your customers know this from the beginning.
If you can’t get paid quickly, and on-time, your small business will never survive. Overhaul your invoicing and ensure you get what you deserve.
Home-based Business? How to Make Your Home Client Friendly
Home-based Business? Some Ideas for Places to Meet Clients Outside Your Home
Should You Pay Yourself Salary or Dividends When You Incorporate Your Business?
Five Common Mistakes That Small Business Owners Should Avoid
Do You Know Why the CRA Uses a Profit Test for Business?
What is Income Splitting and How Can it Reduce Your Tax Bill?
Self Employed? Do You Know What Your Tax Obligations Are?
How Can You Claim Expenses on a Business Loss?