To be a successful small business owner is to master the art of juggling. You’ve got a lot of balls in the air at any given time. Borrowing from Peter to pay Paul may be inaccurate only in that the names are changed. Your employees expect their paychecks on time and you need to get paid in order to scratch out those checks. Collecting on invoices can be as simple as opening your mailbox or as difficult as pulling teeth. Here are a few ways to make it smoother rather than harder.
Until that check is in the bank, it isn’t. A good rule of thumb might be “Don’t blow a gasket with someone who owes you money.” Remember your manners and be polite. Research indicates that including a “please” or “thank you” in an invoice increases your likelihood of getting paid by 5 percent. Anything that easy which increases your odds of getting paid is just good business.
The sooner you invoice, the sooner you’re likely to get paid. If you’re able to invoice immediately upon completion of work, do so. But maybe that’s not practical, particularly if you have lots of clients/customers to bill and other work to be done. In that case, set aside a dedicated time each day or week that is devoted strictly to invoicing. Getting paid should be a top priority for your business, surely you can find the time. Additionally, your clients probably want to pay their bills timely and discovering invoices they still haven’t paid can be a financial hassle.
Time is money. And if a client is going to be late with your payment, they should incur a penalty. We’ve all paid our share of late fees; everyone knows the drill. Besides, late fees add a sense of urgency, lest that fee keeps increasing. Establish payment schedules and penalties as part of the initial contract and feel free to reference them in your invoices.
Welcome to the 21st century, where money is electronic. Your clients will be able to pay faster and you’ll be able to receive sooner if you give them the option of using an electronic payment option. This will also reduce checks getting lost in the mail (or the client claiming, “The check is in the mail”).
Keep accurate records of the hours you spend, expenses you incur, gas you buy and other charges that apply. If there is ever any questions about overbilling or underpayment (or vice versa), you’ll have documentation. Record all pertinent information as you go, rather than waiting until the end of the project when it might be forgotten.
Break it Down
For especially large invoices, the type that can make or break your company, don’t put all your eggs into one basket. Rather than invoice at the completion of a project and wait for your lump sum to arrive, break the work into manageable chunks — monthly installments, say, or at certain agreed-upon benchmarks along the way.