Picture this: it’s your end of year. You’re poring over your spreadsheets, and things just aren’t adding up. You’re pulling your hair out, wondering where you went wrong in your small business’ accounting this year.
Finally, you realize: it’s not your accounting that’s off, it’s your payments. Specifically, you still have a handful of active invoices.
64% of small businesses have invoices that will go unpaid for at least 60 days. Late invoices lead to awkward conversations with customers and frustration over your business’ finances. You can do better.
By now, you might be asking yourself: how can I avoid this in the future? It’s easy. Payment terms and conditions.
These are essential for mapping out your business’ income and customer relationships simply and professionally. If you don’t have payment terms and conditions in place, it’s time to set yourself up for success.
Keep reading for eight tips on how.
Half the headache of invoicing is looking up client information, inputting information, and keeping track of all your various invoices across email and snail mail. Why create all this extra work for yourself when automatic invoicing programs exist today?
Sign up for a program like Billdu, which features automatic invoicing, expense tracking, and estimate forms. Your clients will be impressed with the professional quality of your correspondence, and you’ll have everything in one place.
Instill Short Payment Terms
Don’t feel bad about asking your clients to pay you quickly. They’ve got the dough, or else they wouldn’t have hired you for the job. It’s important not to undervalue your worth, and that includes your worthiness of being paid quickly and on time.
There are a ton of different types of payment terms. Make sure to choose the one that makes the most sense for your business, but keep it as short as possible.
Set Your Office Hours
Owning a small business can be hard. There are tons to do and think about, and you’re responsible for it all. And that’s beside the actual work itself!
35% of small business owners cite poor time management as a big contributor to feeling overwhelmed by their business. In real-life language, that’s the equivalent of you filling out invoices at 11 PM that should have gone out a week ago.
And every minute that those invoices aren’t out is another minute your payday gets pushed back.
Make sure to set yourself regularly occurring office hours each week to take care of administrative tasks. It’ll keep your business running smoothly, which is well worth the hour some business owners might perceive as lost.
It may seem naggy, but it’s actually a good customer service move to follow up with your clients a few days before their invoice is due. Call to ask if they’re happy with the service or product you provided, and ask for any relevant feedback they might have for you.
Gently remind them of the invoice due date, and ask if they need any sort of clarification on your payment terms and conditions. Before you know it, you’re chatting like old friends. Following up is a friendly way to retain your client base while still taking steps to make sure you’re getting paid on time.
Regardless of how much like old friends your clients feel to you, you’re not running a charity; you’re running a business. And business charge interest on late payments.
It might seem harsh, but it’s important that 100% of your invoices get paid. If the incentive of an interest charge on a late payment makes that happen, then so be it.
You can use an interest calculator to determine the right rate of interest for your various payment sizes! Calculate how much extra they’ll owe you per month, and weigh that against your ability to accept late payment to determine the right interest rate.
Checks sent via snail mail are a thing of the past. At least, they should be.
Allowing your customers to pay you digitally will speed up your whole payment process. It’s easier for them, meaning it’s better for you. It’s also the status quo nowadays.
Certain automated invoicing programs will allow you to accept credit cards, PayPal, or Stripe as a valid form of payment. Make sure to consider the processing fees, though. Set a recurring addition to invoices that will be paid digitally to cover those costs.
This is one of the biggest time-saving payment terms and conditions in the book. The easier the customer can pay you, the faster they’re going to.
Bill the Right Person
Too many invoices in small business history have gotten shuffled around from mailbox to mailbox, passing hands from family member to family member. Make sure to address the person who’s paying the bill directly to avoid any delay in the invoice being paid.
If you’re unsure, feel free to give your client a call and ask who manages the accounts. It’ll show that you’re professional, interested in clear communication, and want to make sure the right person is getting the right paperwork.
There should be some language in your payment terms and conditions that allow you to keep payment history and credit files on all of your clients. This way, if you ever have a repeat client, you’ll know exactly how they paid, and if they paid on time or not.
This is also a great way to make sure you’re staying on top of all your payments. If any of your clients have a payment plan with you, it’s on you to keep track of that. Make sure you’re keeping detailed notes on:
- dates paid
- amounts paid
- interest accrued
- time passed since invoice was sent
- time passed since the due date
Good bookkeeping is a cornerstone of a successful business.
Your Payment Terms and Conditions
Now that you’ve read up on some important tips for drafting your payment terms and conditions, you should never have a late invoice again. When you communicate openly about what’s expected of the client during the payment process, you eliminate surprises and make the whole process much smoother.
Need help drafting your invoice in the first place? We can help. Check out this article on creating the best invoice you possibly can.
Small business owners have a lot to handle on their own financially. Many find themselves handling billing and invoicing along with other management duties.
Writing an invoice can be detailed enough, but things can get complicated when you have to send multiple invoices to people.
Double invoicing is a problem that could cost you time and money you can’t spare. Luckily, we’re here to help you get your duplicate invoices under control.
Why You Have Problems With Double Invoicing
Sending multiple unneeded invoices (=duplicate invoices) to clients can lead to a variety of problems.
Clients and vendors can get annoyed because of the multiple invoice send-outs. It reflects poorly on your business as a whole, and if it becomes a repeat problem it could lose your business.
Are you curious about why double invoicing is a problem for your business? Any of the following reasons could be the cause of your duplicate invoices problem.
Improper Invoice Classification
Do you have an easy way to see which invoices have been paid, which need to be sent out, and which ones are past due?
If you can’t clearly see the state of your invoices, you’re setting yourself up to have problems with double invoicing. Sometimes invoices get sent out multiple times because people can’t tell that they’ve already been sent.
The easiest way to solve this problem is to come up with a system that easily classifies invoices. There are plenty of invoice software solutions available that can help keep your invoices organized.
It isn’t unheard of for the occasional double invoice to come out. An isolated mistake isn’t much cause for concern. But when you notice that the problem keeps happening, there may be a bigger problem.
The most common cause of double invoicing can easily be solved by keeping better books.
We know that most businesses have strict rules about how accounting and billing should handle invoices, but do you know if they’re acting following those rules to the letter?
A busy day at the office could mean that someone isn’t double-checking their work or making sure that the right amounts are going out.
Bad bookkeeping can be harmful to your business. If you’re having problems with double invoicing, duplicate payments, or any money matters it’s worth doing an audit of your current system to see how efficient it is.
Once you’re happy with your invoicing system, it’s time to make sure that employees are properly trained on how to follow it.
In the business world, it isn’t unusual to work with several branches of the same business. This may be common, but it can still cause problems for your bookkeeping system.
Ideally, your accounts payable system should be able to create one vendor master file record for each supplier or business you work with. But it isn’t out of the ordinary to accidentally make multiple invoices for the same client.
Departments can merge as time goes on. It’s possible that you may be sending two or three invoices to the same department.
If you’ve been in business for years, it may be worth going through the addresses and contact information for each client you invoices.
Start by contacting everyone you sent a bill to in the past three months. Eventually, you’ll be able to get rid of information you don’t need, and you can see your instances of duplicate invoices dramatically fall.
Multiple Invoicing Methods
In the past, most people would expect to receive an invoice from a business in the mail. But as time went on, more communication methods were added.
For a while, most people would fax an invoice so that it can quickly get to the vendor. Now it isn’t uncommon for most people to do their business online and send their invoices via email.
These are all excellent ways to send invoices, but you shouldn’t be using every single method possible to invoice clients.
Some people like to send multiple invoices as a way to “cover their bases” and ensure that clients receive them. Sending invoices in different ways can confuse clients and create unnecessary paperwork for them to sort through.
Proper invoice management involves coming up with a unified way to send things out.
It can be a good idea to reach out to clients and ask which method of invoicing they prefer. If you’re a small business it’s easier to accommodate different methods.
This can get trickier if you’re a bigger business. It may be easier for you to pick one method you prefer to stick with it for every client.
No Checks and Balances
How do you ensure that every invoice you send out is correct?
It isn’t uncommon for most businesses to trust individual accountants or front desk staff to handle sending out invoices. This may make sending things out faster, but it also leaves you open to double invoicing.
When you expect everyone to handle invoices on an individual level, there’s no way to check that the right amount of invoices are going to the correct people.
You could have someone in accounting sending out the same invoice that someone’s assistant emailed out two days ago.
The easiest way to handle this issue is to have invoices go to a centralized location before they’re sent out so they can be reviewed. One person can be in charge of making sure that invoices are correct, and that there aren’t any duplicate sends.
Ignored Invoice Disputes
Incorrect invoices can occasionally go out despite everyone’s best intentions. A client may dispute an amount listed on an invoice, or there may have been an internal error on your end.
If you don’t resolve issues quickly enough, you could have issues with double invoicing.
You may be sending out invoices that don’t reflect the proper amount the client owes. That’s a waste of time for the people handling the invoices, and it could annoy the client.
Whenever there’s an issue with billing or invoicing, make it a priority to resolve it as quickly as possible. If you don’t, it could cause billing issues down the line.
Stop Creating Duplicate Invoices
Now that you know how to stop double invoicing, it’s time to get the rest of your business on track financially.
Check out our online invoicing software. You can create simple invoices, manage to send them out, and more.
Be sure to keep checking our blog for more finance content for startups, and share this post with your friends and professional colleagues.
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