Effectively Utilising Invoice Management System
Cash flow is one of the key concern areas in finance for most business owners. Managing the outflow and inflow of cash for businesses is no easy feat and are often one of the functions requiring improvements. The ability to accurately and comprehensively address the invoicing process promptly can reduce cost, increase collection and improve cash flow. Below are the top tips for small business owners to utilise the invoice management system:
- Starting A Comprehensive Customer Checklist
- Establish a Uniformed Invoice Numbering System
- Simplify Payment Processes
- Sending Invoices Promptly
- Be Consistent – Charge Late Payment Penalty
- Constant monitoring
Starting A Comprehensive Customer Checklist
Ensure that you have a checklist to collect all the vital information of each customer. If you have multiple data entry points, make sure that each of them is aware of the checklist to capture detailed information of each customer to improve your chances of timely payment. Critical information you need to have included full customer name, contact number, invoice number, invoice date, payment terms, details of the product/service you are invoicing and additional information where required.
Establish a Uniformed Invoice Numbering System
Having a uniformed invoice numbering system will make it easier to track invoices. Your invoice numbering system can incorporate the date of invoice, acronym of the customer and the running number of the invoice. An example will be 201117_SAP_001 : in which the first six digits are the year month day followed by the acronym and running number of the invoice. There are many ways to make the numbering system work for you, but make sure that everyone in the organisation is aware of how to generate the uniformed invoice numbering system.
Simplify Payment Processes
Make sure that it is easy for your customer to pay your invoices. Have the invoices sent to your customers via email or maybe a customer portal for the customer to view their due invoices. Your system should also record that the invoices have been sent to your customer and that if any payment is made, it would be recorded as paid. Your system should also be able to generate aging reports and send payment reminders where needed – so you can ensure that your invoices are paid promptly.
Sending Invoices Promptly
Integrate your invoicing system with your business for an effectively invoicing process. Once you have completed your service or delivered the product, make sure that your system sends out the invoices with no delay. This gives your customer the urgency to settle your invoices as they are promptly sent with proper reminders being sent if they miss out.
Be Consistent – Charge Late Payment Penalty
To make sure that your customers pay you on-time, enforce the late payment penalty. Your customer may be deliberately delaying your payment and ignoring your payment reminders. Having a late payment penalty ensures that your customer takes serious attention to paying you on time. Make sure that you mention it in your invoices on the late payment penalty and the fees involved. You can also have a late payment contract drafted by your lawyer to ensure that you clearly state all the terms of the late penalty. Ensure that your customers are provided with a copy of the contract.
Regular monitoring helps to keep your cash flow in good order. Once you are aware of the daily performance, you can take proactive action to improve your cash flow. Reports and dashboards can be beneficial to get an idea of the overall health of the business. Cash flow is equally as important as inventory management in any business.
In a nutshell, having an Invoice Management System is now a necessity not only for large businesses but also for small businesses. The ability to manage cash flow can be the lifeline of your business and at the same time, give you the ability to plan.
To get started with an Invoice Management System to improve one of the key financial component for your business, contact us for a no-obligation discussion.