When starting out in a new business, billing is often the thing that causes the most stress and anxiety. Once you have pitched an idea, taken on a client, completed the work and delivered it, actually getting paid for it should be quick and straightforward. Unfortunately, many clients have other ideas in mind.
Chasing up payments and trying to get paid for your time takes up precious energy that you could be using to build your business, scout for new work and complete existing projects. On top of that, if there is a backlog of payments yet to come in, chances are that this will affect your cash flow, potentially getting you into much more serious trouble.
Although there is little you can do to make clients pay up in full and on time once they have received your invoice, there are a few tweaks that you can make to your invoicing process to make it easier for them to pay. Here are some of the best tips for organising your invoicing.
Make Sure Your Invoice Includes Everything
Whilst it may feel like overkill, particularly with clients that you have worked with before, you should go out of your way to ensure that your invoice contains all of the information your client could possibly need in order to pay your invoice. Some businesses will send an invoice back if they don’t contain things like a date, delaying the all-important payment date.
Your invoice should include:
- The word ‘invoice’
- The date of issue
- Your business name
- Your contact information
- Your client’s name and contact information
- An invoice number (more on this later)
- How much is owed and an itemised bill stating what the charges are for
- Details of VAT or any other items you have added to the bill
- Your payment details
- Your payment terms and conditions
Number Your Invoices
Whilst the invoice number won’t necessarily mean anything to your client, it is a critical step in your own invoicing process so that you can keep track of all of your customers and bills. When chasing up payments you can use this number to let your client know which invoice you are referring to, and you can make sure that all payments have been made by checking back through your invoice numbers.
This is also important for if you are audited for any reason, as it helps you to quickly pull the files that you need.
Set Your Terms At Your Earliest Opportunity
Before you sign a contract or agree to work for a client you need to set your payment terms and conditions and be sure that the client accepts them. Many smaller businesses feel awkward setting out strict rules for late payments and so on, but it is just good business. You could also offer a discount on your service for early payment, and penalty fees if the payment is late.
Discuss this with your client long before you begin the work and get it in writing so that you can refer to it later if necessary. You should also set a payment due date at this point and the length of this term is up to you. Some people prefer to have 7 day payment terms, whilst for a bigger client or one whom you trust you may extend the payment terms to a month or longer.
Have online payment options attached to your invoice if you really want to make it easy for clients to pay your invoices. Whilst a cheque or bank transfer is a traditional and effective way of getting paid, nowadays most services we use have quick and easy online payment options – so why shouldn’t you!
Provide a link on your emailed invoice to a PayPal or other online payment service, allowing your client to pay it as soon as they receive it, whilst it is still fresh in their mind. You will be amazed at how quickly you start to be paid when you add a digital payment option.
Work To Your Client’s Schedule
Whilst, as mentioned above, it is entirely up to you the timescale that you set your payment terms to, it is worth bearing in mind that some clients will have conflicting schedules that could see your invoice payment delayed.
If you have a regular client who runs a 30 day payment cycle, whilst you normally run a 7 day one, think about combining your work and just putting a bigger invoice in once a month rather than lots of smaller ones. This will make it easier for your client to pay you and also for you to predict when your money is going to come in.
Try to remember that clients are often waiting for payments of their own before they can pay their bills and stay in constant contact so that they are aware that you are waiting, but don’t make them feel harassed. You could also ask for a certain amount upfront if this is a new client or you don’t yet trust them, as a compromise.
Don’t Be Shy To Send Payment Reminders
Lots of sole traders and entrepreneurs feel uncomfortable with the idea of sending payment reminders, as they don’t want to ruin their reputation with clients. However, a payment reminder is often the simplest way of getting paid quickly, as most clients that have breached payment terms will just have forgotten about your invoice.
Set up automatic late payment reminders that go out if you haven’t been paid to a certain schedule. This saves you having to do it personally, and is less aggressive, so you don’t have to worry that you are threatening your reputation.
Look At Value-Based Pricing
Instead of charging a standard, hourly rate for your work, you could base your pricing structures on what you believe your product or service is worth to your customer. This can help clients to feel that they are getting real value for money, helps you to set a final price early on that you know your customer is happy with, and send out your invoices quickly and without the hassle of adding up your hours.
The advice we lay out here may seem simplistic to some of our readers, but it is no exaggeration to say we see businesses run into problems with alarming regularity because of lack of control of their invoice ledger.
Why not take a few minutes to review your processes now, or give the experts at TFMC a call to discuss your current arrangements and any problems or headaches that are caused by late payments.
We are available on 0800 4704820 or via email at [email protected]. We look forward to hearing from you.