One of the biggest small business invoice challenges out there, is getting them paid on time!
Managing cash flow in your business can be one of the trickiest parts of running your business. Recent data compiled by the research firm CB Insights found that 29% of startups fail because of a cash crisis. It was the second highest cause. (The number one factor, at 42%? A lack of a need for their product in the marketplace.)
Some small business owners seems to forget that their cashflow starts with the actual invoice they send to their customers – or not. Having consulted with a specific client for a number of years, it always blew my mind when we analysed their management accounts and their revenue was way below their budgeted figures and cashflow as a result extremely volatile.
Turns out after digging a bit deeper into the root cause of this, was that the partners of this firm felt that they couldn’t invoice the full work-in-progress (even though the customers signed off on it) at each stage of completion of the project. So instead of invoicing a smaller amount each month, they refrained from invoicing altogether! Now for most of us this seems insane, but this was a real problem for them that took us quite a while to sort out and for them to realize that everyone is entitled to fair compensation for their efforts.
This is just one of many challenges small business owners face and we found it quite interesting when we investigated the below mentioned summary of challenges small business owners suffered globally:
Small Business invoice challenges
Getting invoices out on time when you’re busy
This is a common problem. When your business is thriving and you’re busy working to make money, taking the time out to send invoices can be difficult. Consider using cloud accounting software to quickly prepare and send invoices.
Following up on overdue invoices
This is related to the previous point – time is always at a premium in a busy small business. Again, cloud accounting software can help by automating reminders based on your settings.
Splitting payments across multiple invoices
Account reconciliation can be tricky at times. Make sure your clients include your invoice numbers as references for every payment they make, to help you work out which invoices have been paid.
Invoicing quickly and accurately
It’s important that your team communicates effectively with your Finance Manager or accountant, to ensure that work carried out is invoiced properly every time.
Ensuring that all completed work is invoiced
Time-tracking software can be useful here, especially when there are several people working on each client account. Be sure to get this right, otherwise your business will be throwing away money by working for nothing.
Creating an invoice that doesn’t go to the bottom of the pile
You can design your invoices so that they stand out, but what’s more helpful is to build up a good working relationship with your client’s accounts department. Don’t rely on a pretty invoice to get you paid.
For many small business owners, uncertain cash flow is what holds them back from reaching their full growth potential.
One of the leading culprits of poor cash flow is late-paying customers. By implementing a few, simple billing practices, you can reduce the time before payment and establish steady, predictable cash flow.
We use Xero Accounting in-house to streamline and automate most of these items and have since implementation helped close to a hundred clients do the same – if you are ready to get your invoicing sorted in 2017, why not test-drive its efficiencies by signing up for a FREE 30 day trial below!?
Top tips to get your invoices paid faster
Embrace the cloud.
It may be a cliché, but the cloud has changed the way the world does business and. Leveraging the cloud can improve nearly every aspect of running a business.
With the cloud you can have information at your fingertips, anywhere, anytime. You can access the same documents you edit on your desktop from any mobile device. Should you receive a question about an invoice and need to put last-minute touches on it, you can confirm information and send it right away.
Mobile-enabled interactions can solve genuine pain points for businesses and their customers.
Invoice correctly on time.
Setting reminders and alerts can help you streamline the process for submitting invoices consistently and on time each month. You may even be able to set up automatic, recurring invoices.
This would reduce the amount of time required for the company to perform redundant communication between customers, businesses and employees.
Better yet, for recurring monthly bills, your customers may even be able to set up automatic payments to the company, saving time on both sides and providing your company faster payment.
Offer incentives for paying early.
Use incentives to establish desired customer habits such as paying invoices early. Consumer apps that track rewards and deliver additional incentives and discounts for using and paying through a platform reinforce continued use.
Offer incentives or discounts and give individuals a reason to act quickly and in a timely fashion. Sometimes a little push is enough to get someone over the hump and pay early, the Holy Grail of cash flow.
Keep a detailed audit trail.
Track your paperwork. Storing all your invoices, bills and documents in one place (preferably online) lets an organization to keep the business running smoothly. Creating this type of audit trail also adds security for the business and its customers.
You never know when you will need the audit trail to show a customer that he or she hasn’t paid yet.
Keep open lines of communication with customers.
I have found that often when people have not paid they just didn’t know they had not. Sending a simple email reminder to customers can go a long way. A simple gesture can be the gentle nudge people need to get a payment on its way.
Best of all, you can automate these reminders using cloud solutions. Part of the value of an email reminder is that it reinforces your relationship with the customer and provides an opportunity to engage.
Use the email reminder to create an open dialogue with clients, providing them with a sense of security and comfort.
When your customers know they can come to you with questions, they will want to be sure they do right by you and pay on time. More important, helpful customer service provides customers an incentive to stay with the company amid tough times.