Lack of cash will eventually kill any business, large or small, and it makes no difference whether the business is making good profits. I’m sure that you have heard the saying ‘cash is king’ and this is important in business because it means that you can always cover your costs.
A business owner contacted me because he had serious cash-flow problems. In truth, there was no flow of cash at all. His profitability was good and the company’s turnover more than adequate. So why was there no flow of cash? Simply that no invoices had been sent out for over six weeks. Six weeks and he was wondering why the cash had dried up!
Now before you say ‘well, that’s surely a one-off’ let me tell you that lack of invoicing is pretty common in business. And I’m not just talking about being slow at getting invoices out; I know many companies that don’t send all of their invoices out. It’s totally astonishing!
So here are eight tips on how to make your invoicing process not only effective but that will ensure that the cash keeps flowing. This is one area where having a good system in place will, literally, pay rich dividends.
1) Invoice every day, week or month, whichever is the most appropriate. The most important thing is to be consistent.
2) Confirm the amount to be invoiced is correct with your client before invoicing. This solves a lot of problems later on.
3) Ensure that all order numbers, etc., that are required are included on the invoice. Again this solves problems later on.
4) Ensure that any credit terms are clear and agreed.
5) Check that your invoice has been received. Again this reduces future problems, like invoices having never been received and then delaying payment.
6) If, for example you do a lot of one-off jobs, consider getting a mobile credit card terminal. Don’t be put off by the cost of this service as it is far out-weighed by the advantage of time saved not having to chase up payments later. Plus it’s instant cash.
7) If you provide credit, call your customer five days before the money becomes due to check that all is okay and that the payment is scheduled.
8) If payment should fall overdue, call immediately and ask when the payment will be made. Get the name of the person you speak to and the date for when the payment is promised. Don’t be put off from doing this; remember it is your money. It will also demonstrate that you operate a well-run business.