Invoice management is a critical aspect of the cash flow in a business. The inflow of cash depends on the way organisations manage the invoice and payment from the clients. An efficient system will ensure the payments are on time for the suppliers and other processes in the business.
However, many businesses have failed even to create a standard database for the clients and their payment details. This has led to the failure of the organisation since the chances of running out of cash is quite heavy. You cannot rely too much on emergency funds or business loans to run the organisation.
Moreover, a cost is involved in receiving those payments and providing an invoice to the customers. It makes more sense to reduce this cost while trying to have an efficient system of managing payments. Here, we have discussed some ways to create effective invoice management for your small business to smooth out the cash flow.
1. Create a Database
Invoice management starts with managing the data of the customers. You need to create a database that contains all the important and relevant details about your customers and suppliers. This includes their personal information, order history, payment history, and the due date of the next payment.
The tools and software to automate the invoice management process will use the same database. Moreover, the same data helps strategise with the use of visual representation tools. It is easier to ask the customers to fill in the required details with a form.
2. Invest in Automation
Automation saves time and efforts of the employees to streamline the most tedious process in the business. You don’t have to fill in numbers or send individual emails with the invoice to the customers. Also, the accuracy is increased exponentially when the manual process is transferred to automation.
The system requires some investment to make the processes automated. You will save productive hours for the employees to work on something more rewarding to the business. Nonetheless, the investment can be covered with long term loans for bad credit with no guarantor.
3. Adopt Electronic Invoicing
The old-fashioned paper invoicing process is still used by small businesses around the globe. It was great until more efficient methods were made available at a minimal cost. Electronic invoicing is being used to streamline invoice management and make record-keeping easy.
It is more secure than papers with digital signatures and online fund transfer. The risk of frauds is reduced because the data about every transaction and purchase is stored in a secure system. In the end, there is no paper involved which means the business is contributing to the environment.
4. Accept Different Payment Methods
Payment methods are one of the major reasons the payments are delayed in the business world. Your small business should provide multiple options for the customers to make payments. These can range from cash to bitcoins and online to in-store payments.
The online payment methods will ensure the transaction is instant and convenient for both parties. Though, it will require the website to have a secure payment gateway to facilitate the money transfer. Again, a loan from direct lenders such as ForeverFinances can help you set up the website with the essential components.
5. Monitor the Accounts
Many business owners ignore the importance of monitoring the accounts and invoices once the technology is involved. There is no way the current technology is 100% reliable and error-free. Some risk of missed reminders, inaccurate data, and system-errors is always there with these modern technologies.
Therefore, check the accounts and records at regular intervals. Make a checklist of sent invoiced and received payments to find the customers running late. Also, you will remain in touch with the financial condition of the organisation and some problems with the cash flow.
6. Remind the Clients
Your invoice management system should also include a payment reminder to the clients. This will help the business with timely payments from the clients. Do not make the reminders too frequent only to annoy the receivers.
You can mention the charges for late payment to the clients as agreed on the terms in the payment reminder. Always use polite language while sending reminders. Check the bounce rate of those emails to ensure the intended recipients receive the reminders.
7. Make Calls
Do not make the mistake of avoiding the conversation on a phone call with a client to remind them of the payments. Many people avoid this awkward conversation in fear of losing a client. Instead, they will not take it personally to understand the importance of payments to run the business.
They will either make the payments or ask for some time to receive payments from their clients. You can extend their payment date if the reason for running late is genuine. You will build a long-lasting relationship with the clients by helping them during tough times.
8. Reduce the Payment Days
You are paying the suppliers within 7 days while the clients are takin at least 15 days to make the payments. This gap will make the cash crunch inevitable with the growth of the business. And it makes no sense to give different payment time to the clients than the suppliers have given you.
Therefore, make the payment deadline the same for the clients and suppliers. There will be enough money in the accounts to pay the suppliers on time. This will ensure the inventory will not deplete because of the cash flow problems.
9. Create an Agreement in Advance
Ask the clients to sign an agreement in advance regarding the payment schedule and related terms. This should include the late payment charges once the payment deadline is missed. Moreover, the payments on different milestones for long projects should be mentioned in details to avoid a dispute.
To sum up, invoice management requires small businesses to adopt new technologies. They will help them streamline the difference process faster and more accurately than manual methods. However, you are still required to keep an eye on the accounts and contact the clients to remind them of the payments.