Keeping up with invoicing is a common challenge for small businesses, especially when you’re starting out. Invoicing late can eat into cash flow and blow out profit margins you’re struggling to maintain. But it’s avoidable. These three strategies can help you invoice efficiently and get paid on time.
Set Follow-up Procedures for Late Payments
It’s a frustrating truth for India’s small businesses: most clients don’t pay on time. The International Finance Corporation found more than 60% of SMBs wait over 60 days to get paid. Such long payment cycles squeeze cash flow, causing a chronic cash crunch for many businesses. You can avoid the crunch by establishing robust procedures to deal with late payments. First, decide when you want to initiate follow-up action for late payments. If possible, this should be immediately after an invoice becomes overdue.
Next, choose the way you’d like to follow-up with your debtors: letter, email, phone or all three. Consider also sending a monthly Statement of Accounts document with a list of invoices and the amount owed, so your debtors know exactly how much they need to pay. If you have exhausted all the usual methods to collect money owed, you can consider engaging a debt collection agency.
You can either sell them your debt or pay them a commission to get the money back. They can also help you take legal action against debtors in civil or criminal courts. To make things easier on yourself, create templates for follow-up emails and scripts for calls. That way you can rest assured, knowing late payments can be dealt with effectively when you’re away.
Alter Terms to Get Paid on Time
One more trick to ensure your cash flow stays healthy is to revise your payment terms. Specifying when and how you want clients to pay invoices helps safeguard your income. Many businesses set due dates for invoices to be paid within 30 days, but you might want to reconsider this if you’d like to be paid sooner. Think about including penalty charges to discourage late payments and discounts to encourage clients to pay early.
Of course, you also want to remain competitive, so do some research to find out what terms other businesses in your industry offer their customers.
Automate to Save Time
One of the easiest ways to make processes like invoicing more efficient is to automate. Automation isn’t only an option for big-budget enterprises, small businesses can benefit too. As far back as 2010, the Confederation of Indian Industry (CII) pointed out that small businesses can adopt tools to automate processes like accounting to enhance efficiency and boost growth.
You can pay developers to build these tools, but it’s faster and cheaper to adopt ready-made software. Plenty is available today that’s affordable for small businesses. You want one that automates the invoicing process for repeat products, amounts, and customers – allowing you to do things like setting up invoices to be sent automatically to regular customers each month.
Accounting software such as QuickBooks Online allows you to organize your business’s finances, automate sending customized invoices to your customers monthly and have a clear view of your cash flow at any point – helping you take the stress out of getting paid on time. To discover more information about how to improve your cash flow and accounting processes, visit our Small Business Center.