How Small Businesses Can Improve the Way they Processs Invoices

Invoicing can be one of the biggest headaches for small businesses. It's time-consuming to put together these invoices and to manage their path from creation to billing to fulfillment. Plus, there are always a certain amount of customers each month who either don't pay their invoice on time or who don't pay it at all. Then you have to add in the burden of contacting these clients to get them to pay and perhaps taking the issue to the next level if they refuse.

One way to deal with the gap that unpaid invoices create is to use a service for factoring freight bills or other invoices. Factoring services pay you cash for your unpaid invoices and then collect the payment once the customers fulfill the invoices.

However, finding ways to improve your invoicing process can help you avoid the number of unpaid invoices and save time and money. Here are a few things you can do to improve the way your business processes invoices:

Establish Clear Guidelines and Schedules

By setting clear terms and guidelines for your billing process, your clients won't be surprised when they get an invoice or by what they see on it. Your guidelines should include whether you will charge a flat fee for a project or will bill by the hour; how clients are able to make payment; and what the timeline will be for making payment. Your timeline should include information on whether a deposit is due, whether and when installments will be due, and what the final deadline is for payment, as well as the consequences for not making payment on time.

You should present all of these guidelines in a contract that you give clients to sign before you begin work. In some states, you may be able to communicate this information via email and receive their consent in lieu of a signed contract.

The key is to put all this information on the table before you begin work so that there are no surprises for the client. You should then be able to avoid any disputes about how much is owed and when. That will help you get invoices paid and save you time on managing them.

Create Detailed Invoices

Disputes can also arise because customers challenge the total on their invoices. One way to avoid these disputes is to include as many details on the invoice as you can.

For example, instead of including a line that says "house cleaning services," you should include details such as what was cleaned (bathroom floors, baseboards, etc.), how long the clean took, and how many people were involved in the clean. If there are any outliers that contributed to the price, such as special tools that had to be used, you should include that also.

In an ideal world, you will have given the customer a quote before the work begins that matches what is on the invoice and the customer will pay it. However, there are a lot of variables that can cause the price to change and create disputes with the customer. Creating transparency with a detailed invoice will help you justify the price and help the client feel better about paying it.

Maintain a Paper Trail

Keep track of everything you do regarding invoices, including the quote you provided, a contract that the client signed, any emails you sent each other about the service, deadline reminders, requests for extensions, and so on. You may have to refer to any of this information to settle a dispute about the invoice or to take action if payment is not made.

An easy way to create this paper trail is to use an invoice management system that allows you to keep all the information together in one place. You can also use this system to help you streamline your bookkeeping operations so that tax time is a little easier.

Shop around to compare invoice management systems so that you can find the right one. Ask your colleagues for recommendations, and read plenty of online reviews. If you can, try out the system before you commit to buy it. Not all systems work for all businesses, and you need to make sure the system works for your unique needs.

By establishing a clear system for creating and managing invoices, you eliminate the number of surprises for your clients and for your business. You will improve the on-time payment rate for your invoices, which will help you save payroll hours and make your operations more efficient. You will also ensure that you have the cash on hand you need to keep your business running smoothly and to expand when you are ready. Use these tips to help you streamline your invoice procedures, and consider what else you need to add for your unique operations.