By Rachael Chiverton, Credit Control and Cash Flow Expert – Rachael Chiverton Ltd
Why invoicing needs to be top of your daily to-do list
Why do you wait until the end of the month to invoice your customers? Maybe you think preparing invoices all in one go is better use of time. But have you stopped to think how it could be affecting your cash flow. Getting paid on time is the key to efficient cash flow so I say make invoicing a priority and put it at the top of your list every day.
Do the sums
Let’s suppose your payment terms are 30 days. If you complete a piece of work on the 5th of the month but don’t invoice until the end of the month, you can effectively add 25 days on top of the 30 days it takes to get paid. Even if the customer pays on time, it may take another 2-3 working days for that payment to hit your bank account.
25 + 30 + 3 = 58 days
Prepare, plan and get paid on time
Every customer is unique and so is the way you work with each one. Make it clear in the contract or agreement at outset when you will invoice them and when you expect payment and there’s no reason why you shouldn’t combine any one of these methods:
Payment up front
Why not? If you have a new customer and you know you will need to do some research, ground work, buy materials or get a team together, ask for payment up front and make sure you include this clause in your contract with them.
Congratulations. You’re going to be working on a three-month project but how are you going to survive if you only get paid on completion. Before you start work, think about your cash flow and agree stage payments and make sure you invoice on time.
Time reservation fee
Particularly important if you’re a freelancer, speaker, business coach or consultant. People book your services and time and you expect to get paid for it. Don’t lose sleep over cancellations or changes, invoice immediately with a time reservation fee.
Make it easy for customers to pay you
I’ve seen a lot invoices and you’d be surprised at how many make the important detail difficult to find. Make sure the invoice date, the amount, how to pay (bank details), by when, your contact details and company information are clear.
Why 30 days?
Your business payment terms don’t need to be 30 days. Yes, it’s standard practice but you can choose whatever payment terms suits your business or customer; on receipt, 7 days, 15 days. Make it very clear in your terms of business, the contract with your customer and especially on the invoice you send.
Follow Rachael for the latest news on invoicing and credit control.