For small businesses, invoice management is key to receiving timely payments and proper financial planning. Unfortunately, delayed payments are prevalent across industries and are only getting worse; between 2010 and 2011, the National Federation of Independent Business reported that the average delay time increased by six days!
One way to cut down delay times and avoid the disruption of cash flow is to implement an efficient invoicing system. To help get started, there are a few basics from old-school invoicing that hold true today. Combining these methods with cutting-edge online accounting programs can help your small business create, edit, deliver, track, and follow up on invoices more efficiently.
Classic Tips for Invoice Management
Though it seems simplistic, some of the most effective invoice management techniques are related to organization and accurate recordkeeping. Having a unique identifying number attached to each invoice can allow for easy tracking, whether you are still using a paper-based system or have upgraded to online invoicing. As payments come in, track down the appropriate invoice and make a note on the physical copy, then record the payment in your cash receipts log.
Prompt follow-up is also key to effective invoice management. If compensation has not been received by the time the payment window has closed, immediately communicate with delinquent clients reminding them of the outstanding bill. You'll also want to thank customers that paid on time. After all, businesses rely on cultivating professional relationships through meaningful transactions.
The New Wave of Online Invoicing
Online accounting programs have helped make the invoicing process more efficient. As these programs improve, so do customization and editing options. Choose an online accounting solution that allows you to easily personalize your invoices. You should be able to upload a logo, enter specific payment terms, and include your contact information for customers. Many programs also allow you to use a variety of invoice templates based on the different types of customers you have. Your accounting program should also include editing capabilities. If you make an error in your original invoice, the ability to make edits will allow you to forgo creating an entirely new invoice — saving time, money, and confusion.
Technological advancements in delivery and communication tools have improved the invoicing process. A good online accounting system will allow you to send invoices to customers directly from the program interface, eliminating the need to save the invoice as a PDF and send it as an email attachment.
For an invoice management system to be satisfactory, you should be able to produce a customer statement of outstanding invoices. Pulling an aged receivables report will grant you that visibility, enabling you to track and contact customers as needed. Once their payment comes through, you can easily handle additional complications that may arise, such as refunds, bounced checks, and even advanced payments. Payment is a two-way road, however, so avoid delinquency in your own bill payments by pulling an aged payables report for yourself instantly.
Thanks to online accounting, invoice management has become a much less cumbersome task. While the old methods of organization and follow-up techniques still apply, online systems have streamlined the customization, editing, delivery, and tracking process. These improvements can give you peace of mind and may improve your cash flow.