Inevitably billing processes directly impact any company’s revenue. More efficient systems make sure companies pay and get paid quicker. Ensuring better liquidity safeguards companies against facing cash crunches that can cripple daily operations. 60% of small business owners find finance and accounting decisions difficult. Hence, with this post, we simplify billing process improvement so that you can decide what suits you the most.
Before signing any financial obligations, you have the freedom to discuss and set the payment terms. These terms and policies state how payments will be processed among the two participants. So, you need to ensure that both parties are clear on the payment terms, and there are no ambiguities that can confuse anyone. Clarifying terms helps clients understand your pricing and appreciate your transparency further.
When you finally bill your clients, they’ll be happier to pay back quickly since they know how much they owe you. Additionally, understand the right time and payment mode your client prefers and ensure your current payment methods are comfortable for them. You could also communicate the consequences of late payment. This level of candidness helps you build a long-term relationship with them based on trust.
As discussed earlier as well, clear communication with vendors and customers is the key to a good billing practice. The actual billing process starts with initial interactions about specific details with clients. Your terms of service are a necessary part of creating a smoothly functioning and effective accounts receivable department. These issues usually come to the limelight during the early discussions with your clients. Having some systems to prepare new clients for your invoicing process is a wise strategy.
As a long-term strategy, consider taking a deposit at the beginning of your new contracts. Through these deposits, you can communicate that you’re a serious and confident business that values work and payments. During the conversation about deposits, you’ll also gauge how they handle payments and how valuable they are. Plus, you have additional cash flow that gives your organization a sense of security. Additionally, ensure your communication has regular documentation to avoid confusion in the future.
Timing is critical when it comes to invoicing. Vistr analyzed more than 3 lakh invoices to find that most companies invoice as soon as projects begin. While invoicing after you reach a milestone is great, it can also become quite inefficient.
Key action points from the study were: –
1. When you invoice weekly or after two weeks, begin sending invoices on the weekend.
2. When you bill monthly, begin sending bills on the first of each month.
Through these steps only, you’ll improve your cash flow tremendously. That’s because invoices sent on weekends are paid within 29 days, whereas invoices sent on most weekdays take 39 days to clear. In the monthly billing scenario, sending a bill on the 1st meant getting paid 8 days earlier than sending the bill on the 30th. In each scenario, you end up saving 8 to 10 days of non-payment.
Another great invoice process improvement technique is automation. About 50 percent of accounting executives expect automation to transform the finance business in the next 30 years. If your company sends too many invoices, consider automating them to free up some time. It’s extremely time-consuming to create invoices for each client during every billing cycle.
Additionally, your staff also needs to monitor and follow up with clients on their payments manually, which isn’t productive. Amidst other urgent issues, your staff may forget about unpaid dues. Automation helps you schedule invoices, set reminder alerts for your clients, and track multiple invoices simultaneously. Hence, your accounting staff can freely divert their attention to other important tasks. If you’re considering invoicing software, we recommend you use the cloud-based ones that allow you to work on invoices from anywhere.
To ensure you receive payments quicker, understand how your customer behaves. Through this process, try to gauge if your client is a genuine entity or a hoax. Once you’ve established that you indeed have a real client, establish the billing processes for your goods or services.
Clarify details on payment modes, frequencies, and how long it’ll take to complete the payment. You could also ask them if they’d prefer paying lumpsum charges or using multi-payment cycles. By clarifying these details, you can avoid unnecessary conflicts that may hamper productivity in the long run for you.
By now, all businesses must be paperless. If you’re still using paper-based accounting systems, you need to upgrade to software solutions. Online payment solutions ease digital invoice creation and aid the team in processing invoicing and billing processes effectively. Make payment processing easier for your clients, and you’ll notice a huge difference in how fast you’ll receive revenue.
Read More: Impact of Digital Transformation in the Finance Industry
If your clients miss a deadline, you have the right to ask for your payment assertively. Within the right time frame, send a respectful reminder to the client and request them to process it as quickly as they can. Your reminder message should include invoice details, tracking number, due amount, and due date. Ensure you remind them regularly and get reimbursed. Please don’t jump the gun and take it to court immediately after a single missed payment. If you still fail to get paid, collect a paper trail of all your reminders and invoices, and fight your case to get back your money.
It’s no surprise that businesses need revenue to survive. Hence, having an effective invoicing process is a need rather than a want. If you think small businesses don’t use accounting software, you are wrong! A Statista report states that 64.4 per cent of small business owners use accounting software to manage their finances. So, if you’re looking for a reliable accounting solution, consider using great software.