I remember getting my first invoice paid when I'd just started out in my plumbing business at the ripe old age of 19. It felt like I was on my way.
Little did I know then how hard it could be to get customers to pay on time and how important it would become later down the line when my third business grew to 14 vans.
The faster the business grew, the harder it was to keep on top of my growing overheads like staff salaries, taxes, and material costs.
I knew I needed to make sending and chasing invoices a daily priority if I was going to get enough money through the door to pay all my overheads at the end of the month.
Here’s what I learnt along the way when it came to getting invoicing right:
1. Invoice as soon as the job is done
When I was in the early stages of growing my business, I started to notice what I nicknamed ‘top of mind’ syndrome.
If we sent out the invoice for a repair job the very same day, the customer remembered what we did, and was still so pleased to have their leaky tap fixed, that they paid quickly.
But, if we waited a month to invoice, then we’d wait another month to get paid.
I’m not the only business owner who’s discovered ‘top of mind’ syndrome. A study recently showed you’re going to get paid nearly three times as fast if you invoice on the same day compared with 3-7 days after the job is done*.
2. Automate your invoicing
Invoicing as soon as the job is done is much, much easier when your entire invoicing process can be automated.
Try using quoting and estimating trade software to turn accepted quotes into draft invoices, automatically adding labour and materials costs in as the job progresses.
That way, when the job is done, all you need to do is review and approve the invoice before sending it to your customer.
3. Dedicate time every day to invoicing or employ someone
If you’re going to get those invoices out the door quick smart, you need to make it a daily priority. Quite often what holds back invoicing is that while it's important, it's rarely the most urgent task for any trades business.
The best way to do this is to assign a chunk of time to send and chasing invoices each day. Even better, hire a person dedicated to invoicing.
4. Offer credit card payments
According to stats from MYOB, businesses that accept credit card payments directly from online invoices get paid three times faster than those who don’t. It makes sense.
Your customer can view your invoice and pay online using their credit card in just a couple of clicks. It's simple, easy and they're earning credit card loyalty points.
They also don’t have to worry about having enough cash in their checking account to pay your invoice right there and then.
Try trade software with mobile payment facilitation, that way you can collect payment on the job and it's attributed to the correct job on the spot without anyone in the office moving a finger.
5. Check your payment terms
Forget the standard 30-day payment period. Shorter payment terms are becoming the norm.
A study by Xero found between 70 to 80% of all businesses give 2 weeks or less, and more than half of those request payment within 7 days.
As long as your payment terms are made clear, your customers shouldn’t have a problem paying sooner.
6. Cut out the middleman
This one is obvious but often not front of mind when you’re about to fire an invoice through.
Make sure you’re sending your invoice to the person who’s going to be paying it. If you’re not sure who this is, call to find out.
Otherwise, you risk wasting precious days waiting for your invoice to be forwarded on to the right person.
7. Set up a process for collecting late payments
It’s incredibly frustrating when you’ve done a great job, invoiced straight away, and your customer still hasn’t paid.
If this does happen, make sure you have a process in place so you can chase the payment quickly, without heaps of admin.
Here's what I'd do:
Send reminders: Remind your customer the day before an invoice is due to be paid and then send follow-up email reminders when that day has passed. Better yet, set up automated SMS and email reminders to go out at regular intervals until your invoice has been paid.
Follow-up with a phone call: It pays to give the customer a call to find out why they haven’t paid. Ideally, see if you can get the customer to pay by credit card or internet banking while they are still on the phone with you.
Decide what further action you’ll take (if any): If they’re avoiding your emails and calls, there’s always the option of calling in the lawyers. Just make sure you weigh up the legal fees, and time and energy you’re going to waste, before going down this path.
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*Study by MYOB