Simple Ways to Improve your Invoicing and Billing Process
No matter the size of your business, sorting out your accounts receivable (AR) department is as fun as going to the dentist. The same goes for your invoicing and billing process. The invoicing and billing process of an SMB might be as small and primitive as a one-man-show that’s run manually. Or it may have many moving parts that need to work together effectively. Regardless of the size, one thing is certain: cashflow is king. If you are wondering how to improve your billing process flow, read on.
Why is the invoicing and billing process important?
Let me explain. Your billing and invoicing process is, essentially, the heartbeat of your operation. Cash is the blood that keeps you moving forward every day. Hence, it’s critical that you ensure an effective and streamlined billing process. This is inherent and obvious to all business owners and managers. Still, few of these operators actually take action to improve, streamline, or ensure the efficacy of their accounts receivable department. And there is almost always room for improvement.
Basic, simplistic invoicing, billing, and collection procedures can be both effective and inexpensive. Yet the key is to maintain careful attention to and consider the details of your billing process flow. Rather than hiring excess employees or buying sophisticated software, a smoothly operating customer invoicing process is built with a little elbow grease and some know-how.
Fortunately, getting your invoicing and billing process to a place of stability is not terribly difficult, whether you’re a freelancer or you’re managing a larger outfit. Rather, it’s a matter of developing systems that work well without micromanagement.
So where does a business owner start, and how can you improve your customer invoicing and billing process? Let’s see tested advice on where you should begin with your small business invoicing and billing strategy preparation.
Contrary to what many business owners and managers may believe, your invoicing and billing process begins well before your invoices are even created. In fact, the initial steps of your billing process start to come together as soon as you begin talking specific details with a client. The terms of your service are integral to creating a smoothly running and efficient accounts receivable department. You typically discuss these issues at the first meeting with a new client. So there are some systems you need to have in place for preparing new clients for your billing process.
First and foremost, as an SMB providing a service, whether you are B2B or B2C, you should always get a deposit at the beginning of a new contract. Requesting a deposit starts you off on the right foot in a number of ways.
Ιnitial deposits show clients that you take your work (and payment!) seriously. If a client is late or difficult about paying theirs, you know what you can expect for future payments. And whether or not the client is worthwhile. Also, deposits do wonders for improving the security and reliability of your cash flow, while mitigating the potential non-payment.
Most important of all, make sure your communication is not just verbal.
A verbal contract, while technically binding, isn’t worth much in a court of law or a business environment. So, it’s imperative that you use contracts for all services and with all clients. There are so many benefits to using clear, detailed contracts that it’s a wonder that so few businesses utilize these important documents. Especially considering how relatively inexpensive they are to produce. Plus, there is no real downside to using them.
When you use contracts you can clearly dictate the terms and particulars of your billing and invoicing process. Be it due on receipt, Net 10, Net 30, or Net 45. The specifics of your payment requirements will depend heavily on your industry and business. Whatever they are though, they should be consistent.
Contracts also help to protect you from non-payment and late payments. As well as allow you to detail out discounts and fees for clients who pay early or late. Utilizing a reward and fee structure, and one that is clearly explained in a contract and enforced, will help you preserve the consistency of your cash flow and client billing process.
Organize Your Invoicing and Billing Process
There are a seemingly infinite number of ways to organize your invoicing and billing process. What matters most is that you are organized and consistent in however you choose to operate your billing. An effective accounts receivable setup can be managed with as little as a simple spreadsheet and Paypal. Or it can make use of complex automation software, such us Elorus, third parties, and multiple employees.
Whether you require simplicity or a more complex and detailed accounts receivable department is entirely dependent on the size and nature of your business.
Whether you have one client or 100, manage your billing process in exactly the same way for all clients. Put systems in a place where everything is documented and accounted for, and every step of your billing process flow is uniform. Consistency and careful documentation of everything will ensure that no invoices are lost, forgotten, or unpaid. Plus, reconciling all accounts will become a much simpler task.
While your business may not necessitate a simple invoicing and billing automation software like Elorus, you should always be looking toward automation in your business. Every automated task, in whichever department, saves time, money, or both. You can automate your customer invoicing process using excel spreadsheet functions and automated payment reminders. Or they can be full-on automation. The level of automation that makes sense for your business depends on your size and industry. Yet some level of automation should always be in place.
When looking toward automation, first consider the most tedious, repetitive, and time-consuming tasks. These tasks burn through the most payroll, and they are often the ones with the most automation options available.
Elorus, for instance, offers a recurring invoicing feature to save you time from repetitive tasks by setting up rules with just a few clicks!
Realistically, there is no reason not to go paperless. Thanks to email, online payment solutions, and the many technological advancements in AR software, every industry conceivable can operate more efficiently and effectively without paper. Also, going paperless can earn your industry some benefits for being “green”.
Nowadays, people are much more cognizant of their email than their snail-mail. Besides, allowing clients to make payments electronically makes the process much simpler. Customers now know how to process invoices for payment online, and they actually prefer it! They will thank you by paying more promptly. At the bare minimum, clients should have the ability to have their transactions be paperless.
There is no greater step toward a simple, fast, and effective client billing process than maintaining a high level of consistency. First, a consistent process allows for faster actual work through repetition. Secondly, it makes it easier to identify problem clients, issues with billing, and other ways to improve your systems.
Also, a consistent (read: professional) billing process is the best way to show clients that you, well, mean business. All invoices should be clear, organized, detail, and branded.
If a client receives unclear documentation from you, they will not take the business seriously. You want to represent the highest level of professionalism at all times. Consistency is requisite to doing so. The effort, time, and knowledge required to create an effective customer invoicing and billing process are easier to achieve than what most people expect.
Pay attention to these specific areas to have an AR setup that requires very little effort, time, or money. All this while increasing your total cash flow!
About the Author:
Nicholas Milewski is an entrepreneurial freelancer and digital nomad, with a diverse background in small business and management. His writing has been featured by the likes of Investors Business Daily, Business Insider, and many others.