An efficient invoicing system gets you paid faster and keeps you on customers’ good side (and vice versa). Bad billing practices, on the other hand, cause revenue leakage, slow cash flow, and hurt customer satisfaction.
What sets good billing systems apart from the bad? Use these tips from UNOVA Coworking to set up an accounts receivable system that’s built for growth.
1. Start with a professional invoice
A standardized invoice template is an essential component of any billing system. Include your business logo, name, and address, and clearly state payment terms and due dates to eliminate confusion. Always itemize services and products provided and note the types of payment accepted.
2. Choose an invoicing platform
If you’re still using spreadsheets, upgrade to cloud-based invoicing software. Cloud-based apps are a boon for all types of business processes but especially finances. Many of the leading platforms like Xero, Zoho Books, FreshBooks, and Quickbooks Online start at $20 a month or less.
Instead of manually inputting data, cloud-based tools automatically populate invoices to streamline invoicing and reduce errors. Most include automated reminders so you can remind late-paying customers without any of the awkwardness. You’ll get paid faster and set a high standard with customers.
3. Establish your payment terms
Clear expectations eliminate payment confusion. Plainly state payment terms in contracts and invoices and include specific due dates.
How soon should customers pay? It depends. Net 30 used to be standard but shorter terms of Net 15 are becoming more common especially for new accounts. A frequent late-payer might call for cash-on-delivery, while reliable customers might receive more generous terms. Factor customer history and your cash flow needs when setting terms and consider late payment penalties and incentives to motivate on-time payments.
4. Enable recurring payments
Customers are more likely to pay on time when you make it easy. Online payments and ACH transfers eliminate the delays and hassle associated with mailing a check payment.
Recurring payments are the gold standard for efficiency because they ensure you get paid. Overdrafts are the biggest danger when subscription billing — no one appreciates a surprise fee! — but you can avoid overdrafts by verifying account balances using Plaid’s Balance API before initiating a transfer.
5. Monitor accounts receivable
Software takes a lot of the hassle out of invoicing, but it’s not totally hands-off. Keep an eye on accounts receivable and don’t be afraid to pick up the phone when a client isn’t responding to friendly reminders. Late payments can cause you to miss your own payment deadlines so it’s important to follow up.
Monitoring accounts receivable also draws attention to strengths and weaknesses in your billing system. Do you have a lot of risky customers or a high turnover ratio? You may need to tighten up collection policies to improve cash flow. Are your best customers regularly maxing out their credit limits? Raising the limit could encourage reliable customers to spend more.
6. Make sure it’s secure
Putting a customer’s financial data at risk can ruin a business relationship fast. Security remains a top priority any time you’re handling customer payment data. Verify that your payment service provider uses the latest security standards to prevent data breaches and protect customer data in the event it’s compromised. Use strong passwords throughout all business systems and follow cybersecurity best practices to secure devices and networks.
Getting paid on time is easier said than done. If you’re still relying on slow, manual processes to bill customers and accept payments, you’ll spend more time chasing payments than making money. Optimize your accounts receivable with tools and tactics designed for the 21stcentury and start getting paid faster.
Questions or comments? Have any additional tips or resources to share? Reply below or reach out to Marcus Lansky.