Did you know that cash flow is responsible for more than 80 percent of small business failures? Clearly, making money is important, but so is the timing of when you get paid.
For this reason, small business owners should look to their billing process. The process you use for business billing can be the difference between getting paid on time and struggling with cash flow.
Wondering what you can do to make billing easier for you and your customers? These tips can help you improve small business billing with ease.
Always State Terms of Payment Up Front
The first thing to do is to determine your terms of payment. Will the customer need to pay you within 30 days of the bill, or is it due when they get it?
You should also state any fees that may be associated with paying the bill. Ask the customer to cover the costs of wire transfers or other transaction fees.
You should also state what happens if the customer doesn’t pay on time. Is there a late fee? How much interest will you charge if the payment is late?
Stating these terms up front make it easier for you to pursue them after. They also establish expectations for the customer. Avoiding late fees provides excellent incentive to pay on time and in full.
Create a Billing Scheduling
Bookkeeping can take up a lot of your time as a small business owner. You may feel you don’t have time. Accounting may not be your forte, so you leave drawing up invoices and processing payments for later.
This can lead to situations where you don’t send clients bills on time. If they’re not receiving their bills, they can’t pay you on time.
As part of your billing process, set aside a regular time to do up the invoicing. You may want to bill bi-weekly or monthly.
Also make sure you’re setting aside time to process payments. You should also schedule time to chase down late payments and follow up on bills.
If you send out your invoices at the beginning of the month, you may want to follow up or send reminders two weeks later. You’ll need to follow up at the end of the month or the start of the next month if payments are net 30 days.
Automate the Billing Process with the Right Technology
If sending out invoices and reminders and follow-ups sounds like a lot of work, don’t worry. There are plenty of tools that can help you automate much of your billing process.
You may still need to draw up the invoices, but the right software can make generating them easier. If you’re running a subscription service, then the software may even be able to automatically generate bills on a billing cycle.
The right technological solutions can also help you automate follow-ups and reminders. You can set up automated reminder notices to go out 14 days or 10 days before the bill is due.
You may even be able to offer people free trials or ease the sign-up process. Look for technology that offers advanced billing services as part of the package.
Make Payment Easy
If you want your clients to pay on time, make the payment process as simple as possible. Offer you customers a few different ways to pay.
If it’s possible, make sure they can pay online. You may want to accept credit cards, debit cards, and even payments from a service like Paypal.
You can, of course, also offer wire transfers or other forms of payment.
If you only accept check or in-person payments, your customers are less likely to pay you on time. Giving them an online platform with multiple options means they can pay the bill whenever they have a spare moment. If they forget about the bill, it’s much easier to get it paid when they do remember.
For subscription services, setting up automatic billing also makes sense. A direct charge to the client’s credit card or withdrawal from their bank account means they always pay on time. They don’t need to remember about it, and you don’t need to worry about missed or late payments.
Offer Incentives for Early Payment
Most small business billing terms include “stick” measures, like the late fee. These terms “punish” people who don’t pay on time.
What happens if a customer pays early?
Offering an incentive to pay early is a kind of “carrot” for your customers. If there’s no reason to pay before the due date, they’ll likely wait until the bill is due. That increases the risk of late payments.
It can also hurt your cash flow. Offering a “carrot” for early payment, like a small discount, can help. Some customers will be inclined to pay sooner. That means you get some of your money sooner instead of waiting for all your payments to come in on one day.
In turn, your cash flow will improve. If your business is having trouble with cash flow, you may want to consider early payment incentives.
Make Talking to Customers Part of the Billing Process
Sending out follow-up and reminder notes is important. These small memos can remind a customer to pay a bill or make sure they’re informed about an upcoming withdrawal.
Sometimes, this is all it takes for a customer to pay the bill.
These notes also give people an opportunity to reach out and talk to you about their bill. It’s much better to have a conversation with the client and help them come up with a plan to pay their bill than to have them go dark.
Some customers won’t pay if they don’t feel they have the whole amount. You can encourage them to make payments on the bill. While you may not be paid in full, you will see part of the payment.
It also reassures the customer and makes them more likely to keep paying. When they feel supported and understood, they’ll want to keep doing business with you. That makes them more willing to try and pay your bills as fast as they can.
Solving Your Toughest Business Questions
If you asked, “How can I improve my billing process?”, you should have some good ideas about how to move forward. A good billing process starts with schedules and communication. It’s supported by the right technology and programs that incentivize your customer to pay on time, every time.
Looking for more great tips to help you run your business the smart way? You’ve come to the right place. We have plenty of insightful articles and how-to guides. With them, you’ll be ready to watch your business grow.