How to Organize Your Invoicing Process
By VICKY BROWN
Organizing your billing and invoicing process is what’s called a necessary evil. But, it has to be done – because without it, the life’s blood of your business – cash – will just dry up. So, the best thing you can do to make sure you are getting all the benefit of your hard work, is to lock down your invoicing process as soon as possible.
Honestly, this is a really easy thing to do. Just hire a bookkeeper. They will do it and do it well. And you won’t have to worry about it or waste time operating outside your zone of genius.
What’s that you say – easy for me to say. You can’t/won’t/don’t want to hire a bookkeeper? Well, alright – there is another way. You could do it yourself. If you decide to go that route, here are some simple steps to keep you on track.
Clearly outline what your services are. Do you charge as a one off, or is it a recurring or retained charge. Are you going to charge based on some sort of unit measure like by the headcount, or hours worked or by the project. You’ll need to know all this before you set up your invoicing process.
Next you need to build your payment terms into your agreements. It should clearly outline when payments are due, when they are considered past due and what kind of service charge can be expected for late payments. Pro tip here – check with your state and local ordinances on how much you are allowed to charge for late fees. There usually are limits.
Now you need some good tech. And no, you can’t just track everything on an excel spreadsheet. Well, you can – but it is not efficient and opens you up to all sorts of mistakes. Trust me, get an application that is designed for accounting and invoicing. There are tons to chose from – just a few are Quickbooks, Honeybook, bill.com – even Stripe and PayPal can be set up for ongoing invoicing.
Remember, the goal is to automate as much as you possibly can – let the software do the work, so you don’t have to input the same information every time. Set up your services and their costs, enable online payments (for goodness sakes, you don’t want to be bothering with paper checks), and you should be able to eMail the invoices (we don’t want to mail out paper versions of those either – and in fact, most clients today don’t want them either).
Next, set aside dedicated time each month. You’ll need time to work on invoices – by the way, they should go out on the same day every month – that is, except for initial payments or deposits. And that type of billing should be built into your new client implementation process.
Then, set a regular day and time each month to collect, code and deposit payments that have been made. Don’t do this as a one off (you know, you get a check, you stop everything you’re doing to code it in the accounting system, prepare it for bank deposit, and run to the bank etc.). That’s a huge waste of time.
“…Honestly, this is a really easy thing to do. Just hire a bookkeeper. They will do it and do it well. And you won’t have to worry about it or waste time operating outside your zone of genius.”
Next, set a regular day and time each month to send past due reminders. Take it from someone who knows – do not skip this step. Yeah, I know – the client’s really nice, and you don’t want to upset them, and you’re sure they’re going to make the payment any day now, yada, yada, yada. Listen – take it from someone who let clients get as far as 5 months behind on payments – it’s not worth it, and more importantly, it’s not fair to you or to them. Think about it – how would you like it if you realized you had to pay 4 months worth in one fell swoop because you were past due. Believe me, it’s better to send the reminders early and often – it’s really the best thing for everyone. You need to know if they aren’t going to pay you, so you can address it as early as possible.
Now, on to the actual invoicing – make it a process, instead of something you think about and just start plugging numbers into the system. First, check for anyone who is past due, and apply the appropriate fee. You might also note that their invoice should have a special note in it reminding them that their account is past due by x dollars and needs to be paid right away.
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Then gather the information you need to prepare the bill. It you charge by the head, or project or hour – pull those numbers and have them ready so you can charge the right amount. Also, it’s a nice touch to add any backup that appropriate – so for instance, if you apply charges for things like sending FedEx packages for the client, include a copy of the FedEx bill.
Once you have prepped the invoices, you should have some sort of cross check process in place. Nothing looks worse than sending incorrect invoices – it’s really embarrassing, and makes your business look small time and unprofessional.
And last, but certainly not least – balance your bank account monthly. You need to know how much money you have on hand, and having that number actually be right is a huge help.
With all this you should be in good shape on the billing front – but remember, I haven’t even begun to talk about you paying your bills and expenses each month.
See – that’s why my best advice is to get a bookkeeper – and do it now.