Keep up with the Invoicing
Though a good number of small companies go out of business due to cash flow struggles, it may actually be quite easy to avoid it.
So why don’t they? one may ask. Because one of the solutions is so simple, that it often gets ignored: invoicing on time and effectively.
If the lack of income (which goes beyond poor cash flow management) is not the main reason for such troubles then high chances are that it comes down to an imbalance between the money coming in and going out.
Keeping track of payments and revenue is one thing to do. The other is to make sure money do come in on time.
Invoicing seems like an automatic, piece of cake operation. How difficult can it be to send a client the invoice for your work?
It’s easier than you imagine and, ironically, this is why most managers tend to postpone the billing part and focus on more urgent, time-consuming tasks.
A one day delay is not much of a problem per se, but that one day pushes you towards another one and another and another….by the time you notice a pressing need for liquidity, it’s already been weeks since you were supposed to send that invoice. Ok, so you send it now. But this means more waiting for the money to come in. In the meantime, costs are adding up and some people may not be very understanding about a couple of weeks delay, waiting for your invoice to get paid.
What to do then?
First, if you keep postponing that invoice just because you forget, with too many things on your mind, then schedule it. That’s right, put it in your calendar: send an invoice to… Add a reminder; or two. Don’t hesitate to use any tools that can help you remember it.
If it is a matter of doubt concerning a higher value compared to the work you delivered, then add a discount if it makes you feel more entitled to send that invoice. Remember that even less money is better than no money at all. And it is also a matter of customer relationship. Showing consideration and respect can gain you a long term partner, rather than a one-time client.
If you keep postponing because you consider that your work is underpaid, then one way to fix is to re-negotiate the value by pointing out the extra that you delivered. Or take accountability for underestimating the real work amount (and value) and consider compensating on the next contract. No matter which way you go, just go. The longer you wait, the longer it will take to get paid.
You may simply not like the whole invoicing process. It’s perfectly all right, nobody says you should. You can delegate it to someone who doesn’t mind it, just to make sure it gets done.
Make also sure there is a clear due date stated on your invoice. Ambiguity leaves room for interpretation, which leads to each party acting upon its best interest. Clients can relate differently to a “due in 30 days” statement: working or non-working days? sent to accountability at the end of the 30 days or payment made within 30 days? To avoid any delays from the client side due to his own interpretation just add a clear “last day to be paid”.
Make it personal. A client with whom you develop a good relationship will be more inclined to pay on time or even before the due date. For this, try to include a personal message in the e-mail containing the invoice. Don’t make invoicing a cold, robotic action, but more of a “shaking hands, hope to work together again soon” type of approach. This way the transaction becomes a mean to connect two people – the managers – not two abstract entities.
To sum up, don’t regard the invoicing process as a minor task. It is simple, but of great use to the business. When you manage to do it on time, there are fewer worries left on your mind. Not to mention that you’ll be sure to have the money for future expenses.