When you invoice your clients, it’s likely you’re either using Microsoft Word or some form of accounting software. If it’s Microsoft Word, please, please stop. It’s highly embarrassing for everyone. Let me explain why:
Simply put, invoicing via Microsoft Word is a terrible thing to do and you should change this, but what to?
My personal recommendation is Xero. It’s by far the best online accounting software in existence. Invoicing takes seconds, setting up repeat invoices is a doddle and more importantly, you can see at a glance how much money you’re owed and by who. What’s more, they have an iPhone and Android app, meaning you can invoice at any time.
Invoicing promptly is one of the easiest things you can do to increase cashflow. A friend of mine joined a firm who are now a client and one of the first things she did was put prompt invoicing in place. The average number of days from invoice date to payment was 140. She brought it down to 24. On a turnover of £3,000,000 a year, that’s a lot of money not in your bank account that should be.
Work out the moment you should be invoicing and build it directly into your workflow. Even invoicing a day or two late can have a huge impact on cashflow, and for any business – cashflow is king. What most business owners do from my experience is wait until they have enough invoicing to do, then send several at once. In a corporate environment you just want to get your invoice in as soon as possible because it’s a time thing.
In a small business, the timing of when you invoice can be huge! Imagine you run a flooring company and your client has just come home and had the “Wow!” factor seeing their brand new floor; then 1 hour later the invoice comes through marked “Please pay within 7 days”. It’s very likely they’ll pay it right there and then.
What about if you leave it a few days then invoice? The excitement has worn off somewhat, and now life has got in the way which could delay payment. It’s a hypothetical situation but a completely possible one. One thing is true though – invoice promptly and you’ll be paid far quicker.
You’ve completed a job, here’s an invoice for the balance which says you have 30 days to pay. Why? Who started this ridiculous trend of giving people a full month, or longer to pay. My brother Rob for his first job, as funny as it is, put “Please pay within 1 hour of receiving this invoice” as the payment terms. That was it – 1 hour.
You want to know what happened? They paid in 25 minutes! Call it ridiculous but it worked. We issue 7 day invoices for custom work and won’t start without full payment. You should do the same.
I wrote at great length about this in my first book, Automate Your Business, so I’ll just give you the headlines.
Do not accept cheques under any circumstances. Standing orders should only be accepted if the amount is big enough that you would notice if it was cancelled. I would suggest that if you are going to have standing orders come in, just set a repeating reminder in your calendar system for a few days after the standing order date (to account for Bank Holidays and Weekends) and simply check that way.
Having a simple knowledge of a client’s monthly payment date is a great idea. You can store this in your Business Automation CRM or any good system.
Stick to digital money. Use services like:
They allow you to accept card payments anywhere, directly from your phone or tablet. A superb cash replacement. If you really want to accept cash, offer a small discount for digital payments. If you’re getting on-board with the monthly payment model, one method of accepting payments that you can’t ignore is Direct Debit.
As someone whose business is 100% based on monthly fees, I can tell you that starting to accept Direct Debit was one of the best business decisions we ever made. It makes up-selling so easy, all the money comes in at once and if there are any issues you are told about them instantly.
For example, we had 1 failed report this morning which was a cancelled Direct Debit. They’d actually done this because they’re switching accounts but it was simple to deal with. We got the notification, emailed the client to tell them and immediately they responded with the new account details. Without having a Direct Debit service it would have been weeks before we’d found out, then we’d have to chase the missing payment, everything would be out of sync and it would be a mini-disaster.
The only Direct Debit service I recommend is GoCardless:
Go get yourself a free account and start accepting payments the easy way.