Small business owners need to deal with various operational and management tasks on a daily basis. One of these is invoice management. Although many business owners find invoice management one of the more challenging aspects of running their business, it’s essential nonetheless.
Without a sound invoice management system, you can’t ensure that your clients or customers are paying you on time. It’s possible that over time, you end up not getting paid at all for a few invoices. At the same time, delayed payments can also affect your daily business operations. If you don’t have the funds available to pay your employees, pay your bills, taxes, and other affairs, then you could find yourself experiencing a disruption in your business.
A good invoice management system helps you keep generate, keep track of who you’re sending your invoices to, whether they’ve settled their payments.
How Do You Create a Good Invoice Management System for Your Small Business?
In large businesses and organisations, a dedicated accounts payable team is usually responsible for handling invoice management. Alternatively, a financial expert can also handle their financial affairs. Many small businesses won’t have that same luxury, but it’s still possible to manage your invoices in an efficient way.
Here are four tips on invoice management for small businesses:
Picking the Right Kind of Invoice
You may require different invoicing terms and rules for different projects. This holds especially true if you offer different kinds of services. An example of this will be if you own a small business that offers one-time as well as recurring services. You will need different payment plans for when you provide a single service, as well as regular services.
There are three kinds of invoices you need to consider:
- Interim Invoices: These are sent to the client on an intermittent basis. As the work is completed slowly, the client provides payment for the portion of the work that was completed. The final invoice and payment are made after the work is completed.
- Recurring Invoices: These are sent to the client on a regular basis, based on pre-established and agreed-upon decisions. You can set up a payment system that automatically sends the client their invoice on a recurring basis.
- Final Invoices: No matter what kind of invoice system you use, consider including final invoices into your invoice management strategy. Even if the client has completed all payments, still send them an invoice once the project is completed. The invoice should contain details of all the work done, as well as payments made. If there are payments left, the invoice should specify that as well. This provides clarity and ensures that you can track how much you are owed.
Use Online Resources to Manage Invoices
You can find websites, software, apps, and other technology that allows you to manage your invoices online. This frees up your office space from needing to store large amounts of paperwork. You’re also less likely to lose important invoices and details. Managing and storing your invoices online also enables you to locate them and monitor them whenever you need to.
Manage Avoidable Delays
Over the course of sending invoices to clients over the years, you’re bound to encounter some delays. Knowing what the most common ones are, as well as how to avoid them, can ensure that you track your invoices better.
- Ensure that you’re sending your invoice to the right recipient. If you make an error here, then it could result in your payment coming in later than you expected.
- The terms of your payment should be made clear ahead of time. This prevents awkward scenarios and arguments later on if you and the client disagree about the payment terms.
- Remember that it can take up to two days for banks to process your mind. Keep this in mind when you send your invoice. In a week, you can send your invoice up to Thursday. This still leaves two days, and ideally, you can expect your payment the same week. If you send your invoice any later than Thursday, then you may need to wait till the next week to receive your payment.
Invoices App and Software Can Make Your Life Easier
If you don’t want to crunch numbers and monitor cash flow by yourself, the software can be your solution. Consider investing in good invoice management software. You can also use an app that allows you to send, cancel, resend and track invoices from your phone.
Invoice management can be easy if you make use of the proper techniques to handle your invoices. With these four tips, you can protect your cash flow and ensure better inventory management for your business.
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