Invoice collection is one area business owners consistently neglect.
They’re busy running their companies, focusing on marketing, selling and product development. But here’s the thing…
If they don’t bill efficiently, they won’t be able to keep the lights on.
Sales are wonderful, but cash is king. Too many late-paying clients will destroy any business.
In fact, QuickBooks reports that 56% of small businesses have outstanding invoices at this very moment. That’s more than half of all small businesses waiting on money they are owed right now.
Here’s the issue:
Billing isn’t most business owners’ top priority. Bills go out late. They use outdated processes and methods. Business owners are spending hours upon hours collecting payments manually.
It’s no surprise that sales aren’t turning into profits.
Fortunately, it’s never been easier to fix your small business invoicing process. Technology has evolved billing practices and made everything from automating invoices to collecting payments on-time a breeze. Go to primesoftware.ch for free and see how invoicing automation will change the game for your business.
Let’s cover:
- Why Billing Efficiency Is Important
- What Are You Missing Out On?
- How do You Build an Efficient Billing System?
- Invoice Mistakes that Will Set You Back
Why Billing Efficiency Is Important
If you don’t collect payments quickly and consistently, you’ll have no money.
Billing efficiency ensures your business will always have the funds to operate.
Imagine this scenario:
You have the dream product or service. You build a client base. You start selling.
Then your clients don’t pay on-time.
You can’t pay vendors. You can’t pay employees. You can’t pay rent. Your business grinds to a halt because your clients forgot to pay their invoice.
Your Cashflow Improves
Billing efficiency starts with getting invoices out ASAP.
QuickBooks also found that small businesses wait an average of 22 days to receive payments from clients. That’s three weeks of worthless floating assets you could be enjoying as working capital.
If you keep to a strict billing schedule and clients pay on time, you’ll always have the cash flowing to take your business to the next level.
Customer Relationships Improve
Nobody wants to call their clients and ask why they haven’t paid yet.
It’s awkward and ruins the relationship you spent so much time building. But when clients aren’t given clear invoices or can only pay by check, businesses will automatically pursue payments.
Keep your customers happy by making it as easy as possible to pay you. Automated invoices and streamlined payment options let customers pay conveniently, on their time.
Free Up Billable Time
Here’s a crazy fact.
Most business owners think they aren’t spending enough time on invoicing. When we broke down how entrepreneurs spend their time collecting payment, we found it was even worse.
Many owners are spending way too much time following up on invoices, manually entering information, and correcting invoicing errors.
Stop wasting time and automate your billing processes.
What Are You Missing Out On?
When your clients aren’t paying on time because your invoicing process could use some work, it hurts your business.
Don’t accept slow payments and excuses as normal.
Consider these numbers:
Running a successful small business is hard enough. But when you factor in that the average business with invoices past due is owed $17,500, it’s a recipe for disaster.
Businesses are also:
- Falling behind on their own paychecks
- Stopping business growth
- Suffering from stress and mental health issues
PYMNTS found that 45% of SMB owners neglected to pay themselves last year because their clients weren’t paying on time.
Slow Invoice Collection Speeds Hit Profit Margins
When you think about how late payments affect your business, most entrepreneurs will immediately think of the money tied up in unpaid invoices.
But there’s several hidden opportunity costs that come along with sluggish invoice collection.
Any capital that is tied up in unpaid invoices is unavailable for growing your business. If you’re not investing in new opportunities, your competitors are… and they will pass you by.
You also lose money through increased interest rates on borrowed capital. Not to mention time wasted on manual billing processes.
Your Valuable Time is Wasted
You know those Excel spreadsheets your accountant keeps saying they’ll update? They’re wasting time.
When was the last time you sent out a handwritten invoice? Posted internationally and required clients email you a receipt?
Old-school invoicing techniques are no longer acceptable. Every minute you spend doing manual billing tasks is a minute you can spend improving your business.
Automated billing software can take care of every tedious, manual task we listed above.
How Do You Build an Efficient Billing System?
Building your billing doesn’t need to be complicated.
Implement these tips and watch your billing efficiencies skyrocket.
Get Automation Technology
If you’re not using some type of automation technology for your billing process, you need to.
Manually creating invoices is a slow process that is prone to human error.
Automation sends invoices out at the same time every month. They follow up on late accounts before you even realize they’re overdue.
Automated billing allows you to run your business how it should be run. Free.
Set Clear Payment Terms
“Pay me whenever you can” isn’t a phrase businesses should ever say.
Unclear invoices lead to missed or late payments. Clients need to know when payments are due. Which forms of payment are acceptable. What your late payment policy is.
Remove any grey area on your invoices and watch your payment rates soar.
Make it Easy to Pay You
The fewer steps it takes for your clients to pay your invoice, the faster they’ll pay it.
Offer online payment methods. Credit cards, ACH payments, digital wallets; you name it. Provide a link they can click to pay you directly from their invoice.
Think of every hurdle you can put between yourself and the money you’re owed. Then remove them.
Follow Up on Past Due Payments
You can have the best invoices in the world.
Clients are still going to pay late. It’s a fact of running a business.
However, you can ensure your clients know about past due invoices with automated follow-ups.
Let the software send reminders when invoices are past due. Your clients will appreciate the consistent reminder.
Invoice Mistakes that Will Set You Back
Even if you know how important your billing process is, mistakes will happen.
Avoid these invoicing errors at all costs.
Waiting to Send the Invoice
Typically, the longer it takes to get an invoice to the client, the longer they will take to pay it.
Take invoice creation as soon as the sale is made. Even better, send it the same day you provide the product or service.
Don’t leave money on the table by delaying invoices.
Unclear Invoice Description
A descriptive invoice leaves no room for your clients to contest what they are paying.
“Window Cleaning” doesn’t provide any details. Invoice your clients with the exact service date, quantity, and what specifically you provided.
Think of everything you can include on your invoice to justify what you are charging.
Not Following Up on Past Due Accounts
Don’t sit by idly while your client ignores their invoice.
The longer an invoice goes past the due date, the less likely they will pay you. Make sure clients are notified when invoices are overdue.
Wrapping it all up
Bill efficiency may not be the most glamorous part of running a business. But look at the benefits you’ll provide your business by taking control of your invoicing process.
Better cashflow, happier customers, more time to focus on growing your business. The businesses that thrive are the ones who have their billings figured out. Wake up and smell the capital.
Here’s your invoice efficiency checklist:
- Automate, automate, automate
- Set crystal clear payment terms
- Make paying you as easy as possible
- Don’t be afraid to follow up on past due accounts
You can’t grow your business without a healthy bank account.
Prioritize your billing process and watch everything else fall into place.