Is Cashflow REALLY King In Your Business | 5S Projects

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Is cashflow really king in your business?

Good invoice management probably isn’t the most exciting aspect of running a business, but it’s critical if you want to avoid cashflow issues. There is no failsafe method to achieving consistent prompt payments, but here are a few  suggestions you can put in place to improve and streamline the process, whilst building solid relationships with your customers:

Establish and agree payment terms

When working with someone new, explain your payment terms and policies thoroughly at the outset so there are no nasty surprises. Also ask about their preferred timing and method of payment, plus who you should send the invoice to. This will speed things up when you get to the billing stage. 

Transparency is key so always make sure you’re clear on about exactly what is chargeable to the client and when, including any early payment discounts or late penalties.

Provide clear and accurate invoices

Queries delay payments and the best way to avoid them is by making sure your invoice is clear and correct. Using a well-designed branded invoice template each time you request payment saves time and looks professional. 

Include your bank details and all other payment options, plus the client PO if required. It is important to regularly check your customer data is current and accurate and who the invoice should be addressed to, if different from your usual point of contact.

Automate the invoicing process wherever possible

Make payment as easy as possible for your customers. This means offering a range of options, including online bank transfers and Direct Debit if appropriate. Payment is pre-approved for Direct Debit, which means the customer doesn’t need to do anything to authorise it, so no chasing is required. 

Cloud-based billing systems like Xero or QuickBooks can really help cut down the amount of time you need to spend reconciling invoices, and they also allow customers to click straight through to make a payment.

Switch to regular monthly fees

Billing your customers with a retainer on a monthly basis, rather than ad hoc project-based invoicing, can be beneficial for certain types of business.  It helps with forecasting and simplifies budgeting on both sides, which means you are more likely to be paid on time. It also allows customers to pay by Direct Debit, making it much easier to take payment when it’s due.

Speedy invoicing

Prompt invoicing leads to faster payment – obvious but true. The optimal time to send an invoice is either before you start the work or at the point you are about to complete or deliver, rather than invoicing in batches at the end of the week or month. It also demonstrates your efficiency. And when it comes to recurring invoices, consider sending them on the same day or date each month for consistency.

Follow up immediately on overdue invoices

In an ideal world, all invoices would be paid on time and there would never be a need to chase customers, but this is rarely the case.  Late payments can have a serious knock-on effect on your cashflow, so be sure to stick to the payment terms you agreed and follow up with customers as soon as their invoice becomes overdue. 

And we know it can be frustrating when you’re chasing on payments but always communicate clearly and be polite, because you’re brand’s reputation may be at stake. 

Include early payment discounts and late fees

Providing a client discount for early payment can be a good incentive if your business can afford it, and equally the threat of interest or a late fee helps ensure invoices are settled on time. 

The success of this approach depends on how well you inform clients about your payment policies upfront though, and it’s a good idea to include your full terms on your invoices in case of any questions.  And be diligent with reminders so your customers are kept fully aware of any additional costs they’re incurring.

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