Business Finance: How to Manage Your Invoices
August 31, 2020 (Investorideas.com Newswire) If you run a small business, one practice that you have to establish from the very start is managing your invoices. Your business will only flourish if you keep track of invoices from the start of the project, up to the end when you expect to be fully paid.
The good news is that if you maintain a systematic and updated invoicing system, your small business will be better managed. Customers will also be glad to work with you since there isn't any confusion as to how much you expect to be paid and how much they've already paid.
However, if you find that you haven't been paid yet but need an influx of cash, you may opt to tap an invoice finance company to secure a small loan or line of credit. This will address your cash flow problem temporarily until your invoice has been paid.
Here are the steps you should follow to maintain a well-managed invoicing system.
1. Choose Between a Manual or an Electronic Invoicing System
In the past, creating an invoice was done purely by hand. Each invoice would be written, with separate copies for the seller and the buyer. Nowadays though, electronic invoicing is a more popular choice since computers are considered a basic tool for most businesses.
The advantage of using a manual invoicing system is that there's automatically a hard copy created with each handwritten invoice. On the other hand, using computerized invoicing makes it easier for a seller and a buyer to reconcile their financial records because they use the same software.
Some businesses may opt for a mix between the manual and the electronic systems. This means that the software can be used but elements of the manual system are maintained, such as printing out a hard copy for the seller and the buyer. This is a great way of reconciling records so that even when a problem arises, such as when the computer malfunctions, there are still hard copies of each transaction maintained.
3. Determine If You Intend to Extend Credit
If your small business ships a product or performs a service for a buyer, you have the option of seeking payment right away or extending a line of credit. It's usually easier to keep track of payments that involve credit if you have an electronic invoicing system. You can rely on your electronic records to show when the product or service was availed, and then check when the payment was sent and received by your business.
If the person or business that bought your product or service is relying on credit for now, you'll need to make note of the due date via your software. On the other hand, old-school accountants may remind you that many businesses still don't rely on electronic records at this time, so you may still need to manually remind a client of their payments due by a certain date.
3. Be Predictable
An invoice should always be predictable, meaning the person or business that bought your product or patronized your service won't be surprised to receive an invoice from you. Their records should show that your invoice is 100% accurate. It also helps if you use your business name and company letterhead or logo on the invoice each and every time it is sent to the buyer, so that the transaction will look official, formal, and authoritative. Consistency is the key to repeat business from each of your customers.
If your invoicing system is predictable, buyers who accidentally lose their own records (such as when their office is destroyed by a fire) will be able to reconcile their obligations to your business that much sooner. Consider this to be a benefit for your customer, since business is, after all, a relationship rather than just a single transaction.
4. Maintain a Professional Relationship with All Your Customers
One way to do this is to always include your company details and personal contact information in each invoice. Do this with each and every invoice not just to show your professionalism but also to help those who tend to forget such details.
It'll also be good to remain polite in all your transactions with customers. This means being respectful when you send every invoice as well, by saying "please" or "thank you" when appropriate. This extends even to customers who are a bit late with their payments, especially if they rely on your line of credit to sustain their transactions.
If you rely on certain payment systems, especially for online payments, do include the right details for those too. Make sure to include the accurate account name and the account number that you use, for their convenience, in your invoice.
And of course, when they do make their payments, always acknowledge each payment. That way, they know that your business relationship is alive and flourishing. It'll encourage them to maintain the relationship, for your mutual benefit.
Managing an invoice system is part and parcel of the daily operations of any small business. If you have a great invoice system, it'll be easier for you to sustain the effort of running the company for the long term. It'll also help your customers to remember you and their obligations to you so that your business relationship will survive and thrive, regardless of the business environment.
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