Invoicing, billing and collections are critical components of any business. When all is said and done, your business needs to receive money from customers to sustain good cash flow and remain liquid. The efficiency of this process depends on what you do at the initial stages of invoicing and your customers. Your accounting procedures come in handy at this stage by revealing your accounts receivable balances and letting you know when to follow up aggressively for payments. Do you need more advice on this? Read on for all the tips you require.
Stay Away from Manual Systems
The first step to ensuring an efficient invoicing and collections process is to refrain from using manual systems. Don't draft bills in manual spreadsheets and issue them to your customers. It increases the chances of making an error with sales tax calculations, the number of units or the price per unit. The best bet is to go for an automated invoicing system that uses up-to-the-moment data. Such systems can capture the fine details such as product specification and the number of hours you are billing.
Automated invoice systems also integrate with most accounting software. You can send approval requests and reminders to the customers to keep them up-to-date with their payments. In brief, automation is the key to increasing accuracy and ensuring you can receive your payments on time.
Customise Your Invoicing Times
Your customers have different business models, meaning they are likely to pay your invoices at different times. Therefore, it helps to keep an eye on their tendencies and ensure you invoice them when they are likely to make the payment. Start by asking for the payable approval process from all your customers to know when they are comfortable to pay your invoices. For example, if your customer pays invoices on every Monday, it makes sense to invoice them by the end of the previous week. They can prioritise the payments in their next payment batch. This is more effective than invoicing them on a Tuesday and following up for immediate payment.
Focus on Immediacy
Make your invoice processes scalable and capable of growing with your business's accounting processes. When you issue an invoice to a customer, post it immediately to your accounting system to record the accounts receivable balance. Additionally, do a weekly reconciliation of the accounts receivable balance to get a ratio of what has been paid versus what is outstanding. It will give you a picture of the efficiency of your collections process.
To learn more, contact a bookkeeping service.