We must have earned more than that! How to Maximise Your Income by Running an Efficient Invoicing Process
Let's be honest, there are very few easy occupations out there. Pretty much everyone reading this article will know that business - whatever your business is - is hardly without its challenges.
No one (that I've met, anyway) sits at their desk and thinks to themselves "wow, it's so easy for me to find and attract customers, convince them to do business with me and deliver a quality product or service to or above their expectations". Life isn't that much of a picnic.
That's why it always astounds me when people are so laissez faire about the way they manage their invoicing.
It's bloody hard work to onboard a good client. We pour blood, sweat and certainly the occasional tear, into fulfilling their needs and accommodating their demands. So why do we then lose interest at the pivotal moment that defines the very reason for our efforts in the first place?
Seriously, it's the moment you can get paid. And yet we have a tendency to be so disorganised or unstructured with how we manage our billing that we really might as well just be leaving money on someone else's table.
Savvy business owners here will be nodding furiously in agreement - perhaps thinking of those in their staffing who don't quite share the same commercial drivers as the person who pays their wages.
But it isn't always as simple as just knowing you need to invoice. Life is complex and working life is not distraction-free. So let's break down the systemised methods you can adopt to make sure you bring in every penny you've earned, as soon as you can, for the betterment of your business and control of your cash-flow.
1) Run a tracker
This is as simple as they get, but all-too-often overlooked. Make sure you have a way of knowing what will need to be invoiced - to whom, and when. A written document, a spreadsheet, a list in a notes app (or something more advanced - see point 3 below) - whatever works for you.
Get in the habit of keeping tabs on work-in-progress, upcoming projects and work in the pipeline. Check it regularly and set calendar reminders to make sure you are continually capturing, monitoring and closing-off the billing loop for everything you work on.
If you employ staff, make your teams responsible for the same and hold them to account for reporting back to you regularly on what money they're bringing in.
2) Know your terms and follow them
You're far more likely to get paid on time and without objection if you stick to the rules you've agreed upon. Bullet-proof your contracts and know what the terms agreed between you and your customer are.
Understand when the earliest is that you can submit your invoice - and make sure you do. Remember: the sooner you invoice, the sooner you get paid (depending on your payment terms, which should also be front and centre of your thoughts). You always want to invoice as soon as you can - without jeopardising the customer relationship.
Wherever you can, make sure it's clear to your customer what they will be paying in advance. There's nothing worse than going above and beyond only for a customer to challenge your invoice because they didn't agree to the charges. See also point 4 below.
3) Bake the invoicing mechanism into your sales and fulfilment processes
Manufacturing businesses are a great (though far from the only) example here. If you have a defined order management system (the steps by which you turn a customer purchase into a delivered - and chargeable - product or service), make sure invoicing is an unmissable step within that system.
Set your teams to work with a clear understanding of the process. For instance, a purchase order comes in, a sales order (your commitment to honouring the order) might be raised, a delivery note is generated on despatch and - once fulfilled - the invoice is generated and sent to the customer.
It's all about making sure that billing becomes as automated and regular a process as possible by making it almost impossible to overlook.
For the invoice itself, standardise the format and make sure everyone knows to include the right references - PO Number, Delivery Note number, description of work etc. Plenty of customers (bigger organisations especially) won't pay you without the I's dotted and the T's crossed.
Note that the above covers just one scenario based on invoicing upon delivery of goods/services. The same principles apply though whether you invoice up-front, in instalments or in arrears.
Manufacturers might also want to check out our guide to getting paid on time here.
4) Don't shy away from awkward conversations about cost.
It's way less messy in the long-run if you're prepared to confront the discomfort of negotiating price with your customer ahead of time. That way you both know where you stand, whether you do/don't agree on what will be done and how much it will cost.
There's very little point carrying on with work if it's established the customer won't pay what you're asking and your time should be too valuable to take a big hit on this.
Any reasonable buyer will want to know what they are likely to pay for a product or service and be happy to work with you on this. It's in both of your interests to get it sorted sooner rather than later so there are no surprises further down the line.
5) Focus on fulfilling orders this month
You're building your business. Every sale you can record in your accounts this month helps you get that step closer to the dream.
Focus your delivery staff on closing-off projects they're working on ASAP, getting those orders despatched and getting your business in the position to invoice customers at the earliest opportunity before month-end.
Again, the quicker you invoice the quicker the cash is in your bank so you can use it to pay bills or salaries and fund investment.
6) Be savvy with scope creep
Any one of us will look to get the maximum out of our suppliers. It's natural and understandable. Your customers will be no different with you, and there will be times you're happy to keep them sweet if it greases the wheels of a lucrative long-term relationship.
But don't get suckered into thinking their extra demands mean you have to bite your tongue and say nothing while they take advantage of your generosity.
It's all-too easy to set a precedent for going the extra mile without reward, and unless you call it in, you might find you're stuck in a potentially loss-making situation and a one-sided relationship.
Know your value and don't be afraid to go back to your customer if you need to re-negotiate on price (see point 4 above).
7) Be courteous to your customer's cashflow - but without compromising your own
If your products or services entail larger charges to your customers, you might choose to agree to take payment in installments in recognition of the impact your fees might have on their cash-flow.
This is a courtesy and might aid the business relationship, but again, don't do it at the expense of your own cash position. Consider carefully the consequences on who you can pay and when will have if you decide to do this.
If you've executed point 2 successfully, you have every right to stick to terms and insist that your customer does likewise.
If you do decide to give the customer some leeway, make it very clear what's expected and don't let them off the hook for paying you at the right times.
8) Get help from simple automations
There's no shortage of great software available and many systems can do some great tricks - either by themselves or when connected through a service like Zapier.
One incredibly simple but effective trick with the world-leading Xero accounting system is to use repeating invoice templates.
Repeating invoices can be setup to run in a frequency that suits you (any denomination from weekly upwards), with flexibility over invoice dates, payment terms and what happens when the invoice gets generated.
For example, if you invoice a customer the same amount every month on the same date, you can set the invoice to auto-run and auto-send (complete with placeholder text identifying the month and year it relates to).
Alternatively, if you invoice the same customer routinely - but for different amounts or items, set the invoice to raise as a draft on the right date, and you can update the quantity, price or description before you send it.
The beauty of this is that, while you still have control to get the details right, the hard work is done once (when you setup the repeating invoice) and your routine task is the work of a moment to change the variable details.
We run our payroll billing this way - simply updating the number of payslips each month to reflect how many we've processed - and it saves us hours every month, while making sure we never forget to invoice Dunder Mifflin for Dwight's payslip.
We see leaders with many an attitude to running their businesses, but we can all unite on this simple point: nobody in business works for free. Make sure you get paid for the work you do without busting a gut for nothing.