If we’re going to be completely transparent, when you run a small business, the most important thing is neither customer satisfaction nor happy employees nor building a better mousetrap.
The most important thing is getting paid for your hard work.
Every business in the world has or will struggle with collecting payment for work done on time. It is a situation that is sometimes delicate, sometimes vexing, and sometimes downright agonizing. As a small business owner, you have to dance on a tightrope at times to ensure your clients are happy with your endeavors but also meeting your expectations by paying what they owe in a timely fashion.
If you’re stuck in the yesteryear mentality of sending out invoices in the mail and expecting a stamped envelope with your check a few days later, it’s time to wake up and smell the technology. Both you and your clients live in a fast-paced digital world. It’s your responsibility as the service provider to give them the most comfortable opportunity to pay you as quickly as possible.
On the flip side of the equation, you need to be able to put your hands on your invoices as soon as possible for many reasons, including paying your taxes and balancing your budget. Here are six must-dos for handling your invoices.
#1 Make your small business into a brand.
Depending on who your clients are, their accounting departments might be seeing dozens or even hundreds of invoices each month. Make yours as professional and identifiable as possible.
Not only does this instill in their minds that yours is a legit business, but it also helps them remember any specific instructions you might have how or when your client will pay your invoice. To accomplish this, use or build a template that displays your business name, your logo (if you don’t have one, get one!), your contact information, etc.
#2 Get on the same page on invoice expectations.
Different clients are going to have different expectations when it comes to how they handle your invoices. Usually the bigger they are, the more complicated their procedures will be. It’s your responsibility to discuss the terms and conditions of how your client processes and pays each invoice before you start sending them out. Individuals or other small businesses are more prone to paying invoices on receipt, usually through a convenient service like PayPal.
Larger companies do things differently, often using direct deposit or Automated Clearing House (ACH) payments, and paying once every 15 or 30 days. It’s easy to get into the habit of sending out invoices and expecting clients to pay within hours, if not moments, of receiving them. But that’s not how the business world works every time. Communication is always king.
#3 Keep your invoice information simple.
A professional invoice doesn’t mean you need 5 different colors, 12 different fonts, and an adorable picture of your dog in the upper-right hand corner. You’re not writing the Magna Carta here; you’re just trying to ensure a smooth payment process between yourself and your client. Make sure you spell out precisely who your company is (no acronyms unless that’s your business name) and detail all of the work you’ve done, including the hours involved and hourly rate if that’s the way you work. A line-item invoice leaves no room for error or question.
Also, include the current date, the date payment is expected on (if those two are different), and any relevant account information for payment – such as your bank’s account and routing numbers. Make sure to place your contact information as well prominently. If there’s a problem or a question on the invoice, you want the accounts manager to be able to find you immediately.
#4 Know the differences when invoicing clients in other countries.
You might have US law down pat for invoicing clients, but you’re in a whole new ballpark if your client happens to do business from UK, Canada, or anywhere else around the world. If you’re dealing with a foreign client, connect with someone in their accounting or accounts receivable department and see if there are any special requirements you need to meet or show to get paid in a proper amount of time.
Items like Value-Added Tax (VAT) in UK and EU can trip up your payment process, as can international routing numbers and currency exchanges. Educate yourself so you don’t run into any unfortunate surprises.
#5 Send invoices in a timely fashion.
One thing you can’t afford as a small business owner is being late. Tardiness is a weakness in the business world. There are plenty of businesses out there that will take that first piece of overdue work as a sign that your actions don’t back up your words. That’s a great way to lose clients. Sending in invoices late hurts everyone, mainly your pocketbook.
If your invoices are due every Thursday at 5 p.m., don’t send them in at 5:15 p.m. and expect to get paid on time. Accounting departments have deadlines for a reason; most of them are dealing with banks that have their specific guidelines to keep processes running smoothly. If you’re smart, you’ll send your invoices in as soon as your work is turned in and improved.
Filing invoices early generally allows the bill payers a chance to get at least part of their job done earlier than usual. Doing that on a consistent basis can get you a bit of ‘favored’ status from said accountants, perhaps even to the point of being paid ahead of schedule.
#6 Track your invoices.
There’s nothing worse than waiting all day Friday for an invoice to be paid, then seeing that it’s past 5 p.m. and your money never came in. When you send an invoice, you need to keep up with it, just like you do when you mail a package and get the tracking number to follow its progress online. If you’re using a service like Paypal or Bill, you have the power to send the actual invoice as well copying a direct link to its online location.
If you communicate with clients via a system like Slack or Skype, you can drop this direct link into an IM as the second line of defense. And once it starts getting down to crunch time on the day your invoice generally pays, don’t be bashful about sending a reminder or text to your client. Better to come off the tiniest bit naggy than going into the weekend with your invoice unpaid.