By Paul Grant (CA), Director at Cofficient
As a director of a Software Consultancy, a chartered accountant and previous financial director across multiple sectors, I am in quite a unique position in terms of understanding not just how to invoice, but what tools to use to do it.
So here are my top 10 tips:
1) Bill for everything — The only way to make money in a difficult trading environment is to actually charge for what you do. Your time is valuable so make sure you are actually billing your customer for the work you do. It sounds straight forward but it can be a difficult thing to do — especially when you get on well with your customer — but it is worth it in the long run.
2) Make it easy to reconcile - Reconciliation can tie you in knots - especially when your client has received multiple invoices. Make sure you use unique references or invoice numbers to help you with your reconciliation and insist that your client uses them too.
3) Find the time to invoice - It can be hard to find time to actually create and send an invoice to a customer when you are busy and under resourced. If you are a smaller company or if you have to raise your own invoices, consider streamlining the process and use cloud software. Cloud software can be accessed from anywhere (including your sofa at 11pm at night) and invoices can be generated at the touch of a button.
4) Futureproof your biggest deals - For series or bulk deals make sure you have built a clause into your terms and conditions which covers you for a broken contract. Perhaps something as simple as a 15% surcharge on goods already purchased or an early repayment charge will suffice.
5) Don’t be afraid to ask for payment in advance - If you haven’t worked with a customer before or if you feel they might be risky, it’s OK to get them to pay upfront. It could be an early warning sign or a lucky escape if they refuse to pay upfront. If they are good for payment, feel free to set up credit arrangements for future dealings.
6) Use a credit checking tool - It’s unwise to deal with a risky company — especially if your business is still young and relatively exposed. A tool like Credit Safe or Companies House will help you understand who you are doing business with and whether it’s worth taking a risk. It’s not unheard of for big well established businesses to sink small and new businesses by refusing to settle a bill.
7) Use a multiple currency tool - If you are doing business abroad, choose the right currency. It seems like a small point but it’s amazing how easy it is to get this wrong. If you have good software it will allow you to charge in multiple currencies. If your good accounting software is cloud based, it will pull through the latest exchange rates and sales taxes to be applied to the invoice. Even if you aren’t trading abroad, it’s a useful tool to have — you never know when you will need it.
8) Don’t create the impression that an overdue payment is OK - Chase the payment and do it often. Let the customer know immediately when their bill is overdue. The ones who shout loudest get paid first. Make your voice heard.
9) Track your billable time accurately - It’s not good enough to say “I spent a day on that. That’s about 7 hours”. Was it 7 hours? Or was it 10 hours? Get yourself some software which helps you track time accurately. It will not only ensure that you get paid for the time you work but it will also help you identify bottlenecks or help you understand when you need to back fill your work or even scale back on resource.
10) Make your invoice easy to understand - We all know the pains of trying to understand our utility bills. There are entire “Plain English” movements which are encouraging business to talk straight to consumers. Don’t give your client a reason to query your bill. Make it simple and plain and easy to get in order to minimise disputes. It helps if you’ve fully discussed your payment procedures in advance as well.