Xero advice on invoicing
Xero accounting software have analysed over 12 million invoices and asked 1,500 small businesses for their tips and tricks how to get paid on time.
This post takes the key lessons from the Xero article and includes the key challenges and tips on how to get paid faster.
The four key challenges are:
Challenge 1 – Being busy
Not having enough time is a common an issue. With invoicing it takes time to get invoices out and follow them up. Some business owners say they spend up to 10% of their time creating, sending and chasing invoices. Be sure to factor this into your plans.
If you use Xero you can set automatic reminders and use the smart phone App to issue and chase payments on the go.
Challenge 2 – Payments for multiple invoices
To make life easier, make sure your clients include your invoice numbers as references for every payment they make. You can include this in your terms and conditions along with management fees if they do not provide details.
Challenge 3 – Billing for all work
Have a job management system and use job numbers. If you are a service business, consider using time recording software. And, make sure you record time accurately, just in case the customer questions the bill.
Challenge 4 – Customers putting invoices at the bottom of the pile
Instead of trying to create an eye-catching invoice build a positive relationship with the customer.
Here are ideas on how to get paid faster:
Tip 1 – Discuss payment terms before you get started
As well as your rates get upfront agreement on payment terms so there is no confusion down the track. Link the price to on-time payment.
Tip 2 – Invoice as soon as possible
Send your invoice as soon as possible after the work when the value of your work is still fresh in their mind. The sooner a client receives an invoice the sooner they can pay you.
Tip 3 – Communicate with your clients
Instead of letters and emails it is often best to pick up the phone and talk to someone. And, make sure your invoice is sent to the person who pays the bills.
Tip 4 – Add ‘overdue’ charges
Be commercial and strong – you’re in business to make a profit not to fund everyone else’s business. The law allows you to charge interest and a fixed fee for late payment starting at £40.
Tip 5 – keep your payment terms short
You don’t have to offer 30 day terms for payment. If you hit your clients’ deadlines, there’s no reason why they shouldn’t pay you on-time. Remember that on average customer pay invoices two weeks after the due date.
Tip 6 – Call early and call often
Let the client know immediately the account is overdue. Send a statement or reminder after a few days, and pick up the phone if the payment is overdue by a week or more.
Tip 7 – Make the invoice clear and easy to understand
List the details of the job in a way that makes sense to the client to avoid any confusion and delays.
Being a small business owner often means you’re short on time, but it’s worth putting in the effort to get your invoicing set up properly. Create a process based on using technology.