Small businesses often struggle with managing quotes and invoices. But it is a crucial aspect that affects the business’ cash flow. For a better invoice management for small businesses, it is important to produce and deliver invoices at the lowest possible cost and at the same time, they must stimulate clients/buyers to make the payment at the earliest. Using invoice management system is a great option for small businesses to reduce their invoicing costs while increasing their collections and improving cash flow.
Here are 7 tips to better manage your invoicing process.
1. Create a Checklist
This is very crucial during the initial account setup process. You must collect detailed information when establishing your account to save both time and money later on. It is recommended to develop a physical checklist to avoid any human–error such as overlooking critical information. Also update your invoice management software using this information, which includes:
- Name of account
- Telephone numbers
- Address of business for bank statements, invoices and receipts. It also includes contact information of people receiving such information.
- Tax identification numbers
- Name and contact details of your major customer representatives who are authorized resolve billing issues or make purchases.
Note that such information is confidential and your invoice management system must have appropriate security, especially when it comes to your clients’ financial information.
2. Automate Your Billing Process Integrated invoice management software is in vogue these days. A number of businesses, both small and large, are using invoice management software to automate order and billing process and integrate them into the general business management software. This eliminates redundant staff work and reduces administrative expense and as a result improves management reporting.
3. Use Electronic Invoicing More Frequently
Using electronic invoicing in lieu of paper not only saves your money by eliminating the need for mailing, printing and storage of paper documents, but also enhances your data security. That being said, you need to take proper security measures to safeguard the data. To make your invoicing and collection process faster and cost-effective, pre-design your invoices, print paper copies automatically and send them along with your electronic bills.
Your invoices and statements (be it paper or digital) should include the following:
- Invoice number
- Name, billing address and contact number of the customer
- Name of the person ordering and purchase order number
- Description of product or service along with date of purchase
- Shipping information
- Payment terms and payment instructions such as a physical address for paper checks; credit card/PayPal payment details, and bank details for ACH payments
4. Monitor Your Invoicing Systems
Thorough and constant diligence is key to successful invoice management. Irrespective of the process you are using you need to monitor the invoice management system regularly. A Small business usually lacks large financial reserves, cash management is therefore critical to survival. In fact, you will also need the flow the cash to stay in business.
Create daily, weekly, and monthly invoicing reports to be well familiar with your accounts receivable and collections.
5. Minimize the Ratio of Accounts Receivable Days
As mentioned, cash flow is critical to every business, irrespective of its nature and size. Your “Accounts Receivable Days” denote how long it takes you to receive the money for a sale you have made. It is calculated as:
(Accounts Receivable / Annual Revenue) x Number of Days in Year
In a recent report, Apple stated that the company’s Accounts Receivable Days is less than its Accounts Payable Days. This helps to analyze the cash flow for any company. For example, if your accounts receivable days are around a month from the time of issuing your invoice, delay by even an extra week can cause restricted cash flow for a small business.
It is therefore important to reduce the Accounts Payable Days ratio as much as possible. Here are some ways to do it:
- Send the invoice soon after the sale is made.
- Provide options for electronic payments during the time of sale.
- You can even offer incentive to your clients for making quick payments.
- Similarly, charge interest penalties or late fees to clients for slow pay
Looking for an invoice management software? Look no further! Bookmemate is an online business management software that allows you to schedule appointments, manage invoices and track your inventory.