When you consider that almost half of all invoices are paid late, it immediately becomes obvious that you employ effective billing tactics when operating your own business. While some are great at securing the money that they are owed on time, others end up waiting weeks or even months to get the money they are entitled to while their competitors get paid in a matter of days.
So, how do these companies do it? How can you go about setting up an effective billing strategy so that your company is always paid on time?
When it comes to invoicing and business finances, there are plenty of things you can do to ensure your billing is effective and that you get paid on time. Today, we are going to look at a few of these.
5 Tips for More Effective Billing
These are 5 tips you can employ to ensure a more effective billing strategy.
1. Outline payment terms from the get-go
You should make it clear before any work starts what your payment terms are and what the consequences of late payment are. By doing this and getting it sorted straight away, you eliminate the possibility of confusion on your client’s behalf further down the line and it sets expectations before any work is done.
Make sure that in your contract, you clearly outline your rate of pay, what the scope of your work is, when payment for invoices is due (e.g. within X days), and what may happen if the invoice is not paid by the time it’s due (e.g. a 5% late fee.) By doing this, your client cannot play the ignorance card as an excuse for untimely payment.
2. Keep track of all your time and inventory
Effective billing isn’t just about being paid on time, though—it is about making sure you are being efficient when it comes to drawing up invoices. To this end, don’t be working out your costs when it is invoicing time. Instead, keep a running record of what you are billing for as you do it—e.g. hours spent on a project—so the numbers you need are ready for when you need them.
In addition, doing this ensures that you won’t miss something off your invoice and that what you are charging for is a true and accurate reflection of the work completed. You don’t want to be sending a second invoice to your client asking for more money because you miscalculated your hours—this is very unprofessional.
3. Make sure your invoices are easy to understand
Effective billing also means having invoices that are clear and easy to understand.
Your invoice should be set out and formatted in a way that makes sense to the person receiving it. If there is confusion with your invoice—e.g. when it is not clear what you are charging for—you are more likely to run into payment issues because your client may put the invoice aside to return to later, instead of paying there and then.
Also, ensure your invoice is personalized with your branding and details. This helps to convey you professionally and also tells the client who you are—it’s easier to relate to branding than to a name in plain, boring text.
4. Send your invoice to the person paying it
Just because you are dealing with a company’s CEO directly does not mean you should send your invoice to them.
Make sure that your invoice is being sent to the person, people, or department who are responsible for making payments. This helps to ensure that it doesn’t get “lost in the post” as it is passed from person-to-person.
If you aren’t sure who is in charge of accounts, just ask!
5. Invoice ASAP
Your invoice should be sent as soon as is possible.
The sooner your client gets your invoice, the sooner you will get your money. It also helps to invoice as soon as possible because your deliverables will still be fresh in the mind of your client. If you send your invoice one, two, or three weeks later, your client may have forgotten all about it and this can cause payment delays.