Invoicing ought to be the most enjoyable part of running a small business such as a field services company.
After all, the whole point of working is to get money in the bank!
Yet typically, invoicing can take up to 10% of a manager’s or owner’s time. The problem becomes especially acute when you are busy. Failure to invoice accurately and on time may be a serious obstacle to growing your company even though business is booming.
"invoicing can take up to 10% of an owner's time"
The reason why invoicing can become such a chore is simple: if it is done manually, there is a lot of paperwork involved. On top of that, time is often wasted chasing late payers. Yes, you can get round that problem with an invoice factoring service but that means money going out of the business and a loss of control.
If you undertake work for corporate clients, the problem of late payments is likely to be all the greater. Accountants in finance departments at large companies are often under pressure to squeeze suppliers, either to ride through the lean times or to have more money on the books for investment. So here are some tips to make invoicing less of a headache in 2017 while improving cash flow and increasing your profitability:
Tips #1. Capture information from your engineers
Most important of all: don’t leave money on the table. Time-tracking software is essential here, especially when there are several engineers working on each client account or an individual engineer typically works on several accounts each day. Be sure to get this right, otherwise your business will be throwing away money by working for nothing.
Tips #2. Invoice accurately and on time
Ensure payment requests are sent out for the right amount and to the correct person. Receiving an invoice late or not at all (due to loss or error) comprises more than 40% of all excuses given to small businesses awaiting payment. Prioritise invoicing and credit control– get invoices out on time even when you are busy and monitor payment.
Tips #3. Use accounting software
Make your invoices “stand out”. If you have not already done so, invest in professionally-designed invoice stationery with your logo and company name prominently displayed, together with terms of payment and bank details. Use accounting software to automate the process of printing out invoices clearly. Invoices that aren't eye-catching usually find their way to the bottom of the pile!
Tips #4. Keep your payment terms short
Keep your payment terms short. There is no reason why your clients should not be able to pay within 7 days. In fact, longer payment terms (e.g. 30 days) just make it easier for them to delay payment even further.
Tips #5. Chase your customers for invoicing with service reminders
Don’t make the mistake of thinking that you are annoying people by chasing for payment. On the contrary, you are demonstrating your professionalism. Let the client know immediately if their account is overdue. Send a reminder after a few days, and pick up the phone if the payment is overdue by a week or more. This is so much easier if you can automatically generate a list of overdue payments.
Tips #6. Add late payment fees
If you’ve set your payment terms out clearly on your invoice and the client has ignored them, you are entitled to charge interest in the form of overdue fees. You can expect some robust feedback from many clients if you choose to go down this route, so consider dropping the demand for late payment fees once the lesson has been learned! That way you can retain the client’s goodwill while communicating that you are not a soft touch.
Tips #7. Communicate with the right people to get paid on time
Communicate with the right people. With large customers, the person who appreciates the professional service you provide isn’t the one who actually transfers the funds. If your client’s accounts department doesn’t know who you are, they might ignore your reminders. So maintain a customer database with all the right contact people so it's easy to pick up the phone and talk to the right person.
Tips #8. Use job management software
Say goodbye to needless paperwork! With job management software you can get invoices out on time even when you are busy, follow up on late payment, split the payment across multiple invoices and ensure that all completed work is fully invoiced.
Invoicing and credit control - in fact, all of the above - becomes so much easier if you track, automate and bill by means of job management software that is fully integrated with your accounting package. You can find out more here.
Getting such a system in place will certainly increase your profitability per job and per engineer in 2017!
Watch the video about invoicing, click here or on the video below: