In running my own business, I discovered learning the hard way can often be the best way of getting schooled. I had to take errors on the chin, look at the lessons and experience I got out of it, improve on processes, and work bloody hard to never make that mistake again! Although tough, these experiences helped me grow and improve both professionally and personally.
However, there were some lessons I really could have done without learning the hard way. Unfortunately, I made some pretty big mistakes when it came to managing my billing that cost me, big time.
Losing out financially when you’re trying desperately to get ahead in your business is heartbreaking. Here are 8 billing and invoicing lessons for small businesses to follow so that you don’t have to learn the hard way when it comes to your finances!
1. Set your terms
You are entitled to set payment terms for your invoices to suit you. It’s no longer a given that you should have to wait 30 days for a payment or wait until the the 20th of the month. Instead, outlining a 7-day payment term is perfectly reasonable. Be very explicit with your clients about your terms, both when you provide them with a project pitch, and when you send your invoice. State your expectations around due dates, late fees, how payments should be made, and what will happen should payment deadlines not be met.
You may also require a deposit or split payments throughout the life of the project. This is especially important for high-value projects, and gets a financial commitment from your client that they will meet their side of the deal. I have had several clients go into liquidation or receivership before I was able to get a cent out of them; if I had asked for up-front payment, or at least a deposit, my loss wouldn’t have been so great.
2. Chase overdue invoices
Let go of feeling awkward about asking for money. In many cases, when I have followed up on unpaid invoices, the client has simply forgotten to pay, misplaced the invoice, or never received it in the first place, and there is no malicious intent behind missing the payment, in fact, it’s usually them that feels awkward! Send a statement, but also pick up the phone; it’s easier to have a direct discussion with a client rather than to-ing and fro-ing over email.
If you don’t have your own accounts team to follow up on late payments, consider enlisting the help of a virtual assistant who can help you with this. If you need to escalate things, talk to a debt collector - but don’t leave it too long.
3. Value your services
Have a look at my post, Why You Need to Stop Feeling Guilty About Charging For Your Time, about why it’s important to value the service you provide and feel confident with your pricing every time you send an invoice.
4. Invoice at the end of a project
Don’t wait until the end of the month to send off your final invoices, rather, send them as soon as a project is complete. With cloud software, you can even send your invoice straight from a job site as soon as you’re done. This is better for your cashflow, and likely your client’s too.
As a side note - it’s also a great time to ask clients for a testimonial for project feedback while the project is still fresh in their mind!
5. Make it easy for yourself
Let software do all the hard work for you. Luckily, I learnt this lesson pretty early on, and one of the first things I set up was a subscription with cloud accounting software, Xero. My billing was now done with a few clicks and I could easily reconcile my accounts or see which invoices were still overdue.
If you’re a business who needs to track and bill by time, use job management software such as WorkflowMax, which makes creating quotes, tracking your time and costs and producing invoices for your clients a breeze with one streamlined system.
6. Have records to back up your invoice
One of the key benefits of using job management software to track your time is that you’ll always have an accurate record of the work you have completed. Whether you send a breakdown of your time to your clients or not, you’ll feel confident that you have information to call on should a client question your invoice.
7. Get the correct details from the start
During your client onboarding process, ensure you get as much information as possible about the person, department and address that your invoice will need to be sent to. Sending invoices directly to the person in charge of accounts reduces the likelihood that your bill while get lost at the bottom of a pile or returned because it’s not addressed correctly. Check with your client whether they need a purchase order or project codes included for their own records, and what level of breakdown they require.
For regular clients, it can help to develop a relationship with their accounts department, so you can contact them directly with any queries.
8. Make it as easy as possible to get paid
This might sound obvious, but please check that your payment methods, including your correct bank account details, are clearly stated. Consider including links to online payment methods if applicable, and if you’re happy to accept cheques, include an address for delivery.
Getting paid is supposed to be the fun part about running your own business! Don’t let invoicing stress you out - follow these 8 tips to help ensure that making money is a simple and smooth process for your business!
What other tips do you have for new business owners when it comes to invoicing?