This article is the first of our three part series, ‘Using the cloud to improve cash flow’. We’re sending it to you as we feel all small businesses, will at some time, have to focus on cashflow. The reaction at that time is often to tighten the purse strings but the greater potential for improving cashflow usually comes from the money you’re already owed.
CREATING BETTER INVOICES TO GET PAID QUICKER
As accountants and bookkeepers we see invoices from thousands of businesses and I’m amazed at the poor quality of so many. I’m not talking about layout or design but content and information provided; although there’s a lot to be said for a well laid out invoice and eye catching design leading to quicker payment.
There are 4 key areas to get right.
Payment Details
Working on one of our client’s books this week, we ran a quick poll and noted that just shy of 20% of the invoices received from suppliers didn’t contain details on how to pay the invoice! That’s criminal! A busy bookkeeper or FD will push that straight to the bottom of the pile due to the extra work required to chase up the information.
Research by Xero suggests 64% of small businesses invoices are paid late, so if you don’t provide details on how to pay, you stand no chance. Make sure the details are clear and accurate and if possible, provide alternative options such as a link for taking card payments as well as the usual bank details.
TOP TIP:
Payment Terms
Ensure your payment terms are clearly stated on the face of the invoice and where possible, also communicate them with new clients before you start to undertake any work.
Many small businesses feel the only option is for 28 or 30 day terms but that isn’t the case at all. You can set any term you like but you must ensure the client is well aware, especially if your terms are less than 28 days.
TOP TIP:
Provide the right details
In the UK there are certain items that are required on an invoice these include:
- the word ‘invoice’
- a unique identification number (must be sequential if VAT registered)
- the name, address and contact information of the business (if you use a trading name for a company, the full name must appear somewhere on the invoice)
- a clear description of what you’re invoicing for
- a date of supply and/or date of the invoice
- the amount(s) being charged
- the total amount due
If you’re VAT registered you must also provide:
- your VAT number
- total including VAT
- rate of VAT used
Most importantly, ensure your invoice clearly describes the work completed, this greatly reduces the chance of delays in payment as clients will be happier if they are clear what they are paying for.
TOP TIP:
Provide the invoice promptly
Sounds simple, but if you don’t provide your invoice in a timely manner, don’t be surprised if it isn’t paid in a timely manner.
Clients will place the most value on the service or product you’ve provided at the point they receive it and as such are most likely to pay promptly without query.
TOP TIP:
Provide your invoice with the work you are delivering not later. If that’s by email, do be clear that the invoice is also there attached.
Alternatively if charging for a recurring service, use Xero’s repeat billing function to ensure invoices are sent out at the same time each week/month. Take the next step and signup to GoCardless to collect the recurring amounts by Direct Debit.
These tips will help your business setup a suitable invoice template and ultimately get paid quicker. If you’re still not certain you’ve got it right, do get in touch and we’ll be happy to help.
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