Proper management of cashflow finance is important for the success and growth of any business. Many startups have growth challenges because they have improper management systems of their cash flow. Generally, inadequate management of cash flow in a business leads to incorrect invoicing, late payments, and systemic issues. This leads businesses into spending significant amounts of their limited resources in pursuing debts; which is money and time that could be put to better uses.
Generally, many business owners fear contacting buyers who pay late to request their payments because they fear that doing so can ruin potential long-term relationships. Unfortunately however, this leads to damaging cash flow issues. A study by a U.S Bank established that 82% of business failures were due to poor cash flow management.
Cash flow is the lifeblood of any business. Ensuring that you have enough cash in hand, guarantees your business the necessary funds for covering daily operations and maintaining growth. There are many things which affect the invoicing practices of any business. Here are the top 4 invoicing tips to boost your business cash flow.
- Send Invoices Immediately
Before any customer signs up for your service or buys your products, make your invoicing practices clear, to set the tone from the start. Most customers do not pay before they receive an invoice. Therefore, send your customers invoices immediately you deliver the requested service or product. This is the easiest way to compel the customer to pay. Some business owners struggle with this due to preconceived ideas about the way they are supposed to act. They fear what clients or customers will say about them.
But, sending clients or customers invoices immediately after deliveries are made means you will be paid faster. The only time you should not send the client or customer an invoice immediately is when you have a special billing agreement. For instance, you can agree on a specified invoicing and payment schedule when signing a contract with your client or customer. In that case, stick to the agreed invoicing schedule.
- Use Automated Invoice and Billing Software
Automation of invoicing and billing reduces overheads and stress. Managing invoices with outdated software or tracking costs manually via spreadsheets can be challenging and time-consuming. Automated invoicing and billing eliminates challenges while taking care of follow-ups. Thus, you receive payments faster with fewer labour hours and less efforts. This is a very important aspect of proper management of cash flow finance.
In addition to slowing down payments, mailing invoices creates the room for excuses. On the other hand, an automated invoicing system speeds up payment processes while providing receipts to prove that payments were made. What’s more, an automated invoicing system allows for preferred and saved payment methods. It also matches the time zones of the customer and recurring invoicing to several recipients.
Additionally, an automated system enables you to create and even manage your invoices online from any part of the world. You can also use different app integrations to accept payments online.
- Accept Different Payment Methods
Providing different payment options simplifies processing. Several factors influence the billing department’s structure of a business. These include the duration for which your company has been in operation and the number of employees you have. Some older and smaller businesses are not ready to accept digital payments. On the other hand, some clients and customers pay faster when not required to sign a cheque book. But, when your business provides different payment options, payment barriers are removed.
The importance of convenient and secure payment options can’t be overemphasised when it comes to proper management of a business’s cash flow finance. Most modern customers and clients prefer invoicing solutions that feature cash-free and hassle-free integrations of popular platforms for processing payments.
Some of the payment options to include when invoicing in order to enhance modern business cash flow include debit/credit card payment, PayPal, bank transfer or bank debit as well as e-Wallets. Basically, go for payment options which suit the needs of customers or clients while enhancing your business cash flow.
- Encourage Timely Payment of Invoices
You know the importance of timely payment of invoices when it comes to business cash flow. However, your clients and customers may fail to pay invoices on time if you don’t provide due dates in your invoices and encourage them to pay on schedule. When a client or customer receives an invoice without a due date, they assume you allow them to decide when to clear the bill. Unfortunately, this can place your business invoice at the bottom of your client’s stack.
There are businesses whose payment terms offer between 45 and 90 days within which payments should be made. The goal of such businesses is to be friendly to customers and clients. Others expect clients and customers to pay within a week of receiving invoices. More standard is 28 days but it can vary hugely between businesses.
Regardless of your payment terms, here are ways to encourage timely payment of invoices by clients or customers:
- Send reminders – Use billing and accounting software which sends your clients or customers automated reminders for due invoices. These reminders should be sent on the payment due date and once it becomes overdue.
- Offer incentives – Compelling incentives encourage clients and customers to clear invoices in a timely manner. For instance, you can offer a 5-10% discount to clients or customers who clear invoices within 10 days.
- Penalise late payments – With automated invoicing software, you can ensure effective management of business cash flow finance by charging penalties for late payments. Specify a late payment fee in contracts and invoices. Typically, most businesses charge 1.5% interest per month for overdue payments. However, you can be more aggressive with delinquent accounts.
The Bottom Line
Having invoices cleared on time is not always easy for businesses. Almost every business faces challenges with customers or clients who don’t want to pay the amount due on time. Unfortunately, this affects business cash flow finance management and growth. Fortunately, you can deal with this by following these invoicing tips to boost your business cash flow and thereby enhance its growth and success.