All businesses, big and small, are no strangers to late payments from clients and face issues with invoicing. This not only elongates the payment cycles but can also leave businesses dry. To avoid such situations, here are a few tips on best practices for invoicing.
Best Practices For Invoicing Processes:
1. Automate Invoicing:
Digitise invoices using templates rather than sending out physical invoices. There are several cloud-based platforms for this purpose that are easy to use. They can help set up payment reminders in case the client fails to pay on time.
2. Create A Payment Policy With Short Terms:
Prepare a payment policy accounting for payment modes, time, and duration. Most clients pay in 30-90 days but it’s better to set a shorter term of 15 days or so from the receipt of the invoice. The payment mode and bank account should be mentioned clearly.
3. Design Invoices To Be Clear And Effective:
Invoices should be clear and straightforward. Here’s everything an invoice should contain:
- Invoice number
- Address of both parties
- Date of invoice generation
- Quotes for the work for which invoice is generated
- Tax break-up
- Payment terms and conditions
- Payment modes and options
- The Incentive for the early payment (if any)
4. Keep It Professional:
Be polite and request payments on or before the said due date. Every description and payment terms should sound professional and polite. It is important to respect your clients and show that you value your business with them.
5. Charge An Interest Fee For Late Payments:
Interest fees can be a great way of getting paid on time; nobody likes to pay extra for anything. Charge an interest fee if payment is delayed. Ensure that any additional charges are clearly mentioned in the payment policy and in the invoice as well.
6. Offer Incentives For Early Payment:
Wouldn’t early payments help accelerate your business cycle? Award clients who pay early by offering discounts on the invoice amount or other incentives like store credit, gift coupons, or a percentage discount on future work.
7. Have A Process For Following Up:
Businesses should also have a process for following up. In case of delays, drop an email or give the client a reminder call. This needn’t be awkward or unpleasant. There are many automation tools that can help you with payment reminders.
8. Explore Other Payment Options:
Tap into the evolving fintech landscape in India with services like KredX’s invoice discounting platform. Businesses can also explore different payment services like Google Wallet, PayPal, credit cards, etc.
Businesses might find it hard to hound your customers for payments but it’s important to realize that you are simply asking for what is due to you. Happy invoicing!