Posted on July 21, 2014 by John Hoskin in Accounting Advice
You can have the best idea and the best customer service in the world, but if you run out of cash, there’s no business. Cashflow is all about timing. Just because you make a sale doesn’t necessarily mean you’ve got the cash. If you don’t make sure the cash coming in from sales along with your bank balance is enough to cover you outgoings you might find you don’t have the cash to reinvest in more stock or materials or to pay staff or suppliers; and if that happens, your business will grind to a halt, or even go bust.
One of the key elements to ensuring good cashflow is having a robust invoicing procedure. Our six tips to help in this area are:
1. Keep accurate records and then use them to invoice promptly – the sooner you invoice the sooner you’ll get the crucial process of being paid underway. You don’t want to be fiddling around or putting invoicing off as a boring admin chore because you can’t easily lay your hands of your figures and incorrect invoicing is a disaster for both getting paid and customer relations.
2. Make sure the invoice is clear and all the necessary content is included – unique invoice number date, description of goods or services and when provided, the VAT number, the net, VAT and gross values and bank account details or address for payment.
3. Agree credit terms up front and stick to them, include them explicitly on the invoice and let your customers know what you expect so there’s no room for doubt.
4. Send the invoice to precisely the right individual or department. Make sure you know where in your customer’s organisation invoices need to be sent to get the right attention and not to end up languishing in someone’s inbox or desk drawer until they can be bothered to do something with it.
5. Chase your customers as soon as a debt is overdue. Don’t be shy about this. If you’ve provided the goods or service, invoiced clearly and correctly and been clear about terms from the start, you have every right to expect payment on time and to chase accordingly – it’s your money! Send regular statements showing what is due by when.
6. Make it easy for your customers to pay you. Allow them to pay by electronic bank transfer or BACS and consider asking for direct debit payments, providing Paypal functionality, offering a discount for early payment, or asking for payments on account for long term work. There may be a cost associated with some of these ideas but the benefit of the cashflow and time saved in chasing money will usually more than outweigh it.
The Clever Accounts system allows our clients to easily create clear, precise, customisable invoices, for email or printing and to store templates that can be quickly updated for use with repeat customers. These invoices then automatically update the client’s books and records, VAT return and annual accounts, without them having to enter any further information.