By Gary Turner, UK MD, Xero
Here’s a question for service industry businesses : when do you invoice your customers? I’d hazard a guess that most people will have answered ‘once a week’ or ‘once a month’ (in an ideal world). If you’re running a small company, I’d also bet that many of you are doing those invoices in the evenings or at the weekends.
Here’s another question: why? “Because that’s the only time I have spare to create my invoices.”
The reality is that many small businesses are actually worsening their cash flow through their own invoice processes. And I’m not just talking about people who occasionally or absentmindedly forget to invoice once a month: I’m questioning the thinking behind the all-too-common backlog approach to client invoicing. Say that your clients typically take 40 days to pay in spite of what your 30 day payment terms might insist upon. If you don’t get around to issuing the invoice until 10 days after the job was completed, you’ve actually turned the payment terms into 50 days. That’s 10 more days when the funds are in your customer’s bank account - not yours – and that’s a huge impact on your cash flow.
The challenge for most companies in service-based industries is that every available working hour is spent on keeping customers happy. Whether you are a freelance journalist or a landscape gardener, then the demands of both clients and the bank manager tend to mean long working days, focused on doing the best job possible. Not surprisingly, admin tasks like invoicing get pushed to the wayside, often into what is meant to be family or leisure time.
But what if you could invoice in the moment? On the day that the job was finished, or even before you have left the client’s premises? Until now, that was achievable but not easy (putting the laptop on the washing machine you’ve just repaired is not ideal) but with the advent of mobile accounting applications, it is now within the reach of anyone who has a smartphone.
The latest generation of mobile accounting has been designed to optimise the user experience, with features including the ability to raise and email invoices on the spot, including auto-generation of repeat invoices.
Issuing an invoice to a customer on the spot is not always feasible, but we already know of many small businesses who use ‘dead time’ – the half hour in the car in between meetings, waiting for a train – to check-in on their banking, so adding mobile invoicing is a logical extension.
Apart from effortless invoicing on your smartphone, this revolutionary approach to the traditional invoicing mindset also means that:
· Less effort involved in paperwork & storage – goodbye to having to remember where all the timesheets, other records and expenses receipts are, which can be hard to locate when a few days have passed by
· Less impact on downtime – reduced need to spend weekends and evenings managing invoices
· Better customer service – no client wants a surprise invoice several months after the job was finished and they had forgotten about it. Prompt invoice generation signals professionalism. With mobile accounting applications, an invoice the quality and speed of a utility-style bill is simple.
These are all soft benefits and of course, what is likely to matter most to small businesses is the tangible impact on cash flow. Improving your invoicing process with mobile invoicing might not prompt your customers to pay on time – that’s a whole other topic – but at least it helps to compress the whole process. And that starts with you.