One of the biggest obstacles for small businesses can be getting cash in the door. To determine how well your invoice process is working, calculate your Accounts Receivable Turnover (ART).
ART= net credit sales/ average accounts receivable. Obviously, a higher ART is better. Make sure you don’t include credit card sales as net credit sales; since you’re getting paid almost immediately.
The two biggest issues with receiving payment are 1) billing process inefficiency and 2) customer confusion. You can tackle these issues and painlessly get paid faster with the following steps.
1. Streamline your billing process. You might be part of the problem–make sure you send invoices in a timely fashion.You’re not going to get paid until you send an invoice. Billing efficiency is crucial.
2. Include seller and customer information. Make sure all the necessary information is included on the invoice. Also, use accurate information. Fixing mistakes prolongs the waiting period for payment.
3. Be specific. Everything the customer is paying for should be itemized. Itemize any taxes or fees as well.
4. Communicate deadlines. Be sure to enforce them.
5. Shorten credit terms. If you’re getting invoices out in a timely fashion, you may need to look at things on the customer side. Get their payments in faster by shortening the period between receiving the invoice and paying you.
6. Encourage payment by credit card. This gets payment to your business almost immediately.
7. Have incentives for rapid payment. Consider providing rewards if customers pay well in advance of the deadline.
8. Make receipt-of-invoice calls. One to two weeks after sending out invoices, call to confirm that they were received. Make follow-up a standard part of your billing process.
9. Include a message on the invoice: Consider adding a message box on your invoice template to include any information your customer may need to know.
10. Send more frequent invoices for smaller amounts. This can be less daunting than one invoice for a large sum.