Looking for a way to improve your cash flow? Many small businesses desire a stronger, more predictable cash flow, yet don’t know what processes to implement in order to make this happen.
One simple way small businesses can improve their cash flow is with good, consistent invoicing habits. If you can make the process as simple as possible for your clients, you’ll minimise the wait time between when you issue invoices and receive money in the bank. To guarantee you’re making the process as simple as possible for your clients, make sure you’re including the following information as a minimum on your invoices:
Who to Pay
This should be a no-brainer, but can cause serious issues when missed. Every invoice you issue should include your business name, your name, address, phone number, website and email address.
Essentially, if there is any reason a client may want to contact you regarding the invoice, the process should be as easy as possible. If there’s a particular contact the client has within your organisation, you should include that too.
What to pay
Besides the obvious payment amount, it’s important to provide an itemised list of what your client is receiving. In this list, be as specific as possible. Rather than simply naming the service, indicate the quantity of services received, tax as included or excluded in the price, and any other relevant details.
On every invoice you should provide an invoice number and follow a consistent naming convention so invoices can be clearly recorded and tracked. Many businesses like to use a naming convention reflecting the date, or year the invoice was issued.
When to pay
Do the invoices you issue clients provide information about when they should pay you? Each invoice you send should include a date of invoice and due date for payment.
In addition, you should provide the terms for what happens if they miss the given payment deadline. To be able to send follow-up letters, overdue notices or to charge interest, you need an indisputable, clear process in place.
How to pay
It’s not enough to simply issue an invoice without explaining your preferred method of payment. Do you expect a cheque mailed to you, payment via BPAY, direct transfer, PayPal or credit card payment? Without direct instructions about how to pay an invoice, you can expect clients to dillydally as they try to decide themselves, so you need to clearly set expectations and provide any necessary information for them to process this payment.
If your business has international clients, you need to also have a policy in place for international transfers. International transfers often double-charge you: charging the client to send the payment, and charging you to accept it. Make it clear in your terms and conditions which party will absorb the charges, and discuss with your client before sending the invoice to make sure this is understood.
Practice what you preach
If you expect your clients to pay invoices in a timely manner, you’ve got to give your suppliers the same treatment. Part of having a healthy cash flow is knowing when money is coming into your business as well as when it is coming out. Pay invoices before the due date, and keep your receipts stored in an easily-accessible, preferably digital, format for easy access later down the track.
If you’d like a simple way to improve your invoicing habits, why not try Reep? With live access to your business’ cash flow forecast anywhere at any time, Reep keeps you focused at a high level without being bogged down in the detail.