Payment delay is not uncommon in any industry. More than 48% of the clients delay their payments and ask for extended terms. While this can be comfortable for clients these consistent payment delays can impede the cash flow for businesses and cause problems in the long run if they haven’t already.
Especially small and medium businesses often are victims of the payment delays due to lax invoicing and follow-up procedures. The best part? These invoicing mistakes can be easily avoided to receive prompt payments. As a remote accounting firm specializing in Accounts Receivable the invoicing and collection procedures are the first things we optimize for improved cash flow.
If you are a business that is looking to improve your cash flow that improving invoicing procedure is the best thing you can do too. And you can accomplish this by avoiding following invoicing mistakes.
Here are 6 invoicing mistakes that must be avoided by businesses to improve their cash flow:
Not invoicing promptly: Even though small and medium businesses are highly benefitted from the immediate cash payments, they tend to procrastinate invoicing and this sets up a cycle of delay that consistently hurts the businesses. Also, this invoicing delay provides your clients with an excuse for late payments.
Few businesses may wait up until the bill crosses a threshold but that may inadvertently set them up for cash flow problems. So it is always advised to provide your customers with an invoice immediately after the work to avoid interruptions.
Getting customer information wrong: Though this may seem ludicrous, this often happens with invoicing, especially in a business that does not have a customer database in place. For a small and medium business, it is possible to get the customer information like addresses, contact information and payment amounts mixed up. In a few cases, this may result in privacy issues where confidential information is divulged to another party which could result in delayed payment or sometimes even legal repercussions.
This is exactly the reason why we recommended a master customer database in our Accounts Receivable best practices. Maintaining a master database with customer information that is constantly updated with relevant information, payment terms, and contracts is key to avoiding this mistake.
Not offering adequate payment methods: Even though you have promptly invoiced your customers with the right information there still lingers a chance of payment delay when your payment methods are grossly limited. Making the payment process easy for the client must become a norm for every business which is why one must offer multiple methods of payment to the clients.
One of our clients at Back Office Accountants has benefitted from auto-collect features that automated emails with payments link customers to portals with multiple payment options. One can take a leaf out of this model to come up with a feature that makes it easy for clients to make the payments easy. If you are looking for improvements our Accounts Receivable experts at Back Office Accountants can lend a helping hand.
Not communicating the payment terms clearly: Though the payment terms are communicated to the clients beforehand do not assume that they are well aware of the terms. And sending the invoice when the customers are not 100% aware of the particulars may delay the payment. So always include the complete details along with the exact date of payment to avoid confusion and enable prompt follow-up in case of delay.
Additional fees can stall the payments: A common invoicing mistake made by businesses is added add-on or surprising fee without prior intimation. Even when the work and the cost levied are legitimated no one likes to be surprised with an invoice and this may create a bad customer experience for them. Sometimes the invoice may go to and fro and delay the payment for the businesses. So it is always better to speak to the client before billing and invoicing to avoid these problems beforehand. Never assume that the customer will be happy to pay the additional fees, always communicate before billing and invoicing.
Not follow-up adequately: Even when multiple payment options are offered, the invoice is promptly delivered with the right details and no additional fees, payment delays can happen. A business must always have the right follow-up procedures in place to combat these situations. Automated e-mails, personalized communication, calls and follow-ups must be perfectly paced to chase the late payments.
However, due to a lack of resources, not every business is perfectly equipped to adopt all the above best practices. Especially, small and medium businesses that aim to improve their cash flow by avoiding the above invoicing mistakes will need expert help from Accounts Receivable experts at Back Office Accountants. You can contact us here: https://www.backofficeaccountants.com/