Unfortunately, many businesses face growth challenges due to the improper cash flow management. A U.S. Bank study “found that 82% of the time, poor cash flow management or poor understanding of cash flow contributes to the failure of a small business.”
Inadequate cash flow management has many systemic issues, and incorrect invoicing practices and late payments are common culprits. Essentially, this can lead to cumbersome amounts of resources spent to pursue debts, both financially and in terms of time spent.
If cash flow is an obstacle for your small business, here’s a look at four invoicing tips to help improve it:
1. Send invoices quickly
Send invoices quickly to customers without delay. “It’s such a simple thing, yet many of us struggle with it because we have this preconceived idea of how we should act. Or, we’re fearful of what the client may say,” Nick Darlington, co-founder of WriteWorldwide, adds.
2. Use automated billing and invoice software
The days of mailing and relying on a paper invoice are long gone. This method not only slows down payment but gives a lot of room for excuses.
Automated invoicing software will ensure you get paid faster, create automatic receipts for processed payments, allow for saved and preferred payment methods, match customer time zones, offer recurring invoicing to multiple recipients, and more.
Meanwhile, you can create and manage Invoices online from anywhere and accept online payments with various app integrations for your favorite payments platform.
3. Offer various payment methods
One major step in smart cash flow management is to provide customers with various methods of secure payments for convenience. Most invoicing solutions offer cash free invoicing options and hassle-free integrations with popular payment processing platforms.
Popular payment options include paying by credit/debit card, PayPal, bank debit or transfer, and eWallets, for example. Consider the payment options that will enhance cash flow and suit customer needs.
4. Encourage customers to pay invoices on time
There are standard and proven ways to encourage customers to pay invoices on time. Here are a few to consider:
- Send automated payment reminders: Billing software can automatically remind customers a few days before payment is due payment, on the due date, and a few days after payment becomes overdue.
- Offer early and on-time payment incentives: Offer compelling incentives to encourage timely payment. For example, a standard invoice discount of 5-10% (or a dollar value) can be offered for early payment within 10 days of receipt.
- Apply late payment penalties to delinquent accounts: Invoicing software can help you better manage cash flow and automatically charge customers late payment penalties. Start by specifying a late fee in your contracts and on your invoices. The amount doesn’t have to be big. A typical fee is 1.5% of interest per month after the payment due date. Some businesses may decide to take a more aggressive approach to delinquent accounts.
Improve your bottom line
Getting paid on time is not always an easy task. You’ll often face challenges which impact cash flow and the operations of your business. The above-mentioned invoice tips are small steps in the right direction that can have a positive effect on cash flow and your bottom line.
Veronika Tandon is a Sr. Business Consultant for Invoicera, a leading online invoice software with a user base of more than 3 million customers.