Cash flow management is an important aspect of any business as it enables a business owner to pay for his expenses in good time. Any business owner would readily prefer to receive cash for the services they have rendered sooner than later. This implies reducing the receivables days (the time, on average, that a business’ customers to pay for services/goods they have received on credit) and lengthening the payables days to improve the cash flow.
This is how to keep your business afloat. It follows that you need to ensure that your debtors are always paying you in good time. The most common way to do this is by invoicing your customer. However, what your invoice contains is quite important in how fast the customer takes to pay you for the goods and services you’ve rendered them. In this piece, we are going to look at some of the key pieces of information your invoice should have to get paid faster.
The basic items (or headings) that every invoice should have would be your company logo, your company’s contact details and the invoice of goods itself. The company logo should be visible in any of the four corners of the invoice page.
Your company’s contact details should be availed as well, entailing your company’s telephone (mobile phone number), your company’s physical address, your company’s email address as well as your company’s mailing address. This makes it abundantly clear to the recipient which company it needs to pay. The document should bear a title such as “Invoice” or an equivalent title that also distinguishes the document as an invoice and different from other similar – looking documents such as credit notes.
Another basic part of your invoice would be the client information. This does not necessitate having their logo within your invoice, however the invoice should be clearly addressed to the company you’re invoicing as well as who to address it to. It would be prudent to consult your client and find out who to address to as well as how they would prefer the invoice to be delivered.
The collective effect here is that your invoice looks a bit more deliberate and looks official and a bit more ‘serious’ than other documents and thus places some psychological pressure on your customer to pay you off and clear their debt.
Details of Goods delivered or services rendered
This section entails what exactly you are invoicing for. This part should be concise and clear. Furthermore, the invoice should be itemised and list the unit prices as well as the total revenue expected from the invoice. At the bottom of your invoice list should be a clear total amount due from the customer. This section/figure should aesthetically stand out from the rest of the figures in your invoice. The reason here being that the purpose of the invoice is to collect the total amount due from your customer. An idea would be to have the total amount in its unique row and typed in bold.
These are the premises under which the customer should pay you. A typical term would be “to be paid x days after receipt of goods/ x days after 30th March when goods have been delivered. A suggestion would also be to include a clear payment schedule for your customers based on your own company’s receivables days. So, for a typical company that has amiable relations with its customers, this may be something like 14 days (for the customers who contribute less to the company’s margins) to 30 days (for the customers who make a much larger chunk of the company’s margins). A good policy for this would be to ensure that the payment schedule takes up no more than 75% of your receivables days. This should also include any information on deposits required before delivery of goods and service and any other unique conditions required in the payment terms.
Here we list the different methods in which your customer can settle their outstanding amounts. Having a variety of methods in which you can be paid is beneficial to you as it offers flexibility to your customer and so may get you paid faster.
Debt collection is an important aspect of any business because at its core it determines whether your business survives or dies off. So, it would be best for you to implement proficient invoicing methods. Looking into an organisation such as Boston Commercial Services, who specialise in the effective collection and repayments of customer debts can also have a valuable effect on your business
- How better debt recovery processes improve business cash flow
- Prevention is Better than Cure: Receive Your Bread on Time!
- Some Debt Collection Techniques
- Offering Credit and Managing Risk
- Debt Collection Guidelines in Australia
- Why So Many Businesses Have Turned To Agencies to Manage Their Debt Collection