How to Master Invoice Management For Increased Cash Flow
Invoicing plays an important role because it keeps the cash flowing through your business. After all, 29 percent of small businesses fail simply because they run out of money.
Still, improving your invoice management won’t fix every problem in your business. However, it can go a long way to improve your cash flow and avoid common financial struggles.
What is Invoice Management?
Invoice management is the process of generating, sending, and tracking your invoices. When you complete these steps correctly, you’ll generate more cash flow for your business. Effective invoice management will also save you time in the long run.
Traditionally, businesses sent paper invoices to their clients for services rendered. At that point, accounts payable was a tedious and time-consuming process.
However, today the process of approving payments has mostly moved online. Most business owners find that eliminating paper from the equation is the easiest way to improve the invoicing process. Plus, digital invoices are much easier to track once they’ve been sent. The right online invoice management software can make this process much easier for you.
3 Issues That Can Arise When Invoicing Is Completed Incorrectly
An effective invoice software will reduce cash flow problems, save you time, and help your business run more efficiently. Still, many businesses make costly mistakes when generating, sending, and tracking their invoices. In this post, we’ll review the three most common invoicing issues that business owners face.
1. Allowing Customers to Submit Late Payments
Of course, you want to give your clients a sufficient amount of time to pay their bills, because they may be more willing to buy right away if there’s a delay in payment. However, being too liberal with the invoice due date can cause cash flow problems for your business.
Net 30 is the most standard invoicing due date used by small and medium-sized businesses. Setting longer invoicing terms, like Net 60 or Net 90, may cause more problems than they’re worth.
2. Delays In Invoicing
Another common mistake many businesses make is taking too long to send invoices to customers. If it takes you a month to create and send an invoice, it’ll take you that much longer until you get paid.
Usually, invoicing delays happen because companies still rely on manual invoicing. Switching to online invoicing can make this process much faster, allowing you to quickly generate and send invoices in real time.
3. Mistakes When Invoicing
Another common invoicing mistake is sending invoices that contain errors. For example, perhaps the invoice was sent to the wrong client. Or, maybe you forgot to itemize the services or included fees that the client wasn’t expecting.
Invoicing mistakes will always delay payment because you have to spend time fixing the errors. Then, you’ll have to honor the original payment terms.
In addition, invoicing mistakes have the potential to damage your relationship with your client. When sending invoices, you should strive to get it right the first time, so you don’t risk losing out on future sales.
3 Benefits of Invoicing Effectively
Finding the right invoice management system will make your business run more smoothly. You’ll get paid faster, and you’ll spend less time trying to fix previous invoicing mistakes. Listed below are three steps you can take to create a more effective invoice management system.
1. Make Payment Options Simple
When a customer receives your invoice, the payment options should be self-explanatory. They shouldn’t have to contact you to ask how to pay the invoice or what payment methods you accept. In addition, the due date should be clearly displayed.
By simplifying this process you’ll likely get paid faster, and it’ll reduce the amount of back-and-forth you have with customers over invoices.
2. Set Invoice Reminders
Tracking your invoices is an important part of invoice management. However, if you send thousands of invoices every month, you probably don’t have time to check up on each one and make sure they’re paid on time.
This is where invoice management software can come in handy. When you send digital invoices, you can also set up automatic reminders. That way, the client will be notified once the invoice is overdue.
3. Invoice In A Timely Fashion
It’s essential to set up a good invoicing process so that you can invoice your clients in a timely manner. Switching to digital invoices and using invoice management software can help your business invoice more effectively.
Invoice Management Isn’t Difficult
Effective invoice management isn’t difficult, but it’ll take some planning on your end. If you haven’t already, it’s time to switch to digital invoices and use invoice management software to automate your invoice process. Taking the steps we outlined in this article will help your company operate effectively and generate more free cash flow for your business.
Frequently Asked Questions
What is invoice management?
Invoice management is the process of creating, sending, and approving invoices. If there’s a hold up in any of those three steps, then your invoices will be much harder to manage. Effective invoice management is vital because it ensures your business gets paid and has enough free cash flow.
What are the most common invoicing problems?
Most businesses have a hard time managing their invoicing due to the following three problems:
- They set their payment due dates too late: Generally, Net 30 is an acceptable invoicing due date. Setting your due date for any longer will make it take too long for your business to get paid.
- It takes them too long to send invoices: Sometimes, businesses take a long time to generate and send invoices to their customers. This problem can usually be solved by switching to digital invoices and using the right invoice management software.
- The invoices contain mistakes: Sending invoices that contain errors will cause a lot of problems. Not only do you have to spend time fixing the mistakes, but it could also damage your relationship with customers.
How can I ensure that I’m invoicing my clients in the most effective way?
When you invoice your clients, you need to make sure the payment options are simple and easy to understand. Your clients shouldn’t have to email you to ask what types of cards you accept or how they can complete the invoice.
It’s also important that you invoice your clients in a timely fashion. You should also set up automatic invoice reminders. These reminders will let your clients know that an invoice is due or that payment is overdue, and it’ll save you a lot of time.
How can I get started with invoice management?
The best place to start is by finding invoice management software that you like and feel comfortable using. The right software will allow you to start sending digital invoices and automate the invoicing process.
You can also start to notice what are the most common invoicing problems your business experiences. Once you figure out what the bottlenecks are in your invoice management system, you can create systems to address these issues.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.