Bizstartup.ie - NewsGet smart with invoicing

Cash flow is the essential lifeblood of any business. No matter how profitable a company is, without adequate cash-flow management, it will not survive.  As the recession deepens, we are becoming a nation of late payers. The time it takes for invoices to be paid is extending, as average debtor days lengthen. Small and medium-sized businesses have been especially hit by late payers: According to ISME, small businesses are waiting on average 76 days for payment, which is the longest period on record, while only 16pc of firms are being paid within 30 days.

“Small businesses are being hit hard by customers who delay paying their bills for as long as possible. These clients are not necessarily bad clients. They are more likely to be going through a rough patch with their own business and are looking for critical breathing space,”says Gregory Duffy, CEO of OnePosting, a provider of integrated online invoicing solutions.

“However, in the current economic climate, bad invoicing techniquescan result in cash-flow problems at best and company failure at worst. Many small businesses are on the line and they simply do not have the luxury of being able to wait for overdue invoices.”

To minimise the risk of overdue invoices (and especially those dreaded defaults), here are some tips from OnePosting, which it says will push your business to the top of the queue of suppliers to be paid.

Top 10 tips for smarter invoicing

1.   Agree terms: Ideally you should use standard terms and conditions, but it is worthwhile going through the most important of these with your client such as pricing, payment terms, discounts (if any), insurance and carriage (if relevant).

2.   Reservation of Title: If you supply goods, ensure that you have a ‘Reservation of Title’ clause.  This means that you own the goods until they’re paid for (but ensure that the goods are covered by your customer’s insurance as soon as delivery is accepted).

3.   Issue terms in writing: Make sure that your customer receives a copy of the agreed terms and conditions. These should be in the form of a contract signed by both parties, although many companies include these in small print on the back of their invoices.

4.   Credit approval: Do not automatically extend credit to your customers. Establish a track record with a customer by collecting payments up front for the first few orders. If you are planning to extend credit, ensure there is a formal credit-checking process in place, including trade and bank references. It is vital to set appropriate credit limits and monitor these customers regularly.

5.   Adhere to buyer delivery and billing requirements:Avoid clerical delays by adhering to your customer’s specific delivery and billing requirements. For example, do they issue delivery dockets? Do they provide delivery numbers that must be quoted on invoices? Do they require a purchase order to be quoted on every invoice? When dealing with a new customer, confirm their invoice address, which may be different to the delivery address and note when their payment runs are (and make sure your invoice is in on time to be included in the payment run).

6.   Create the perfect invoice: On top of the standard template (your company contact details, your customer’s contact details, the order number and the date the bill is due), consider including the following:

• Add in a 5 or 10pc penalty for late payments.
• Create your own payment terms. You don’t have to stick to 30 days notice – if you want the invoice to be paid on receipt, then say it.
• Encourage payments to your bank account or credit card payments, making the process as easy as possible for your customer.

7.   Invoice quickly: Invoice as soon as you have completed the job or the items are shipped. For ongoing work, invoice consistently.

8.   Avoid ‘missing invoice’ syndrome: A frequent excuse for not paying on time is that customers say they haven’t received an invoice. Customers with accurate and timely information are more likely to pay than those that require copies of missing transactions. Online invoicing systems automatically notify customers when new invoices are available and send out automated reminders when invoices are overdue. Since all transactions are tracked, the ‘missing invoice’ excuse no longer applies.

9.   Be polite: Be courteous yet firm when making collection calls. If you don’t have a staff member who can do the follow-up consistently, consider contracting it out to an assistant or accountant (or to a spouse or friend if you lack resources). It preserves your relationship with the customer, while your credit controller becomes the ‘bad guy’.

10. Don’t forget to say thanks: Sending a personal thank you when you receive payment will help build future relationships with your customer.

Source: OnePosting