A dozen ways to guarantee you’ll get paid: try our invoicing advice today! – Tutorial
Linda Stern
The first rule of being in business may be this: If you want to get paid, you have to ask. Many newly self-employed people make the mistake of waiting for their clients to pony up, of being too shy to set fees and stick to them, or of not wanting to press potentially valuable clients by reminding them of past-due accounts.
This is counterproductive, as one hapless reader of HOME OFFICE COMPUTING realized when he asked for advice some time ago on how to get paid. “Some of my clients offer to pay, but others take it for granted that I’m doing it for fun,” he wrote, sounding as if he were having less fun all the time.
“Ask and you shall receive,” probably is an overoptimistic view of invoicing. But if you don’t ask, you can wait a very long time before any money starts showing up in your mailbox.
TOUGH BILLING
Here, then, offered in the spirit of assertiveness training, are our 12 best tips for successful billing.
Call it a bill. Ron Thompson, a petroleumengineering and ,energy consultant in Lenexa, Kansas, noticed that his billing statements were falling on deaf desks at his biggest client’s accounting department. “They said they wouldn’t pay ‘statements,’ just ‘invoices’ and ‘bills.'” An incredulous Thompson changed the word to invoice and hasn’t had a problem collecting from that client since. Your form should carry the title BILL or INVOICE in large letters at the top of the page.
Include your terms. It’s typical today for most small businesses to allow 30 days for payments, although “due on receipt” is a popular runner-up. Some small businesses are now putting 10- and 15-day terms on their invoices. Norman Boone, a financial planner in San Francisco who has mainly business clients, usually advises them to make invoices payable on presentation. At the very least, doing so might speed collections.
File ’em fast. The longer you let an invoice languish on your desk or in your computer, the more vague the memory of your services becomes to your client, and the hazier your own recollection of the charges. “If it’s a finite project, bill at conclusion, or a day or two later,” says Boone. If you are doing a high volume of work for a few clients, you may want to bill every week or every other week. But never go more than two weeks without invoicing–remember, the payment clock doesn’t start ticking until your customer opens the envelope.
Follow up firmly. Dave Bennett, a San Diego computer consultant and software writer, subscribes to the “bulldog” school of collections. “I demand payment within 10 days of invoicing, and if they don’t pay by then, I tell them I will suspend the account,” he says. Of course, if Bennett’s clients pay a few days late, he doesn’t burn their business cards. But he did drop one client who habitually waited two months to pay his invoices.
Even if you show your clients some leniency, it’s a good idea not to go too far down the road with one who owes you money and has never paid you. Says Bennett, “Only about 95 percent of all invoices dated 30 days get paid within that time, and it goes down pretty drastically from there.” The worst small-business horror stories often involve consultants or contractors who continued to perform work for questionable clients. These slackers take what they can get before they go out of business themselves or move from contractor to contractor. Refusing to do more work until a late client brings his account up-to-date is a reasonable way to conduct business.
A typical follow-up schedule might involve a friendly phone call at 35 days, and progressively more severe-looking notices at 60 and 90 days. Once your invoice has been in a client’s hands for 90 days, you have some assessing to do. Ask yourself, “Is this a client I’d Irke to keep, or is it one that’s not worth working for?” If you want to keep the client, try to accommodate her cash-flow problems. If you just want your money, do what you have to–including resorting to collection agents and smallclaims court–to get what’s owed you.
Accommodate where you can. Despite Bennett’s tough-guy tactics, he makes his 10day terms more palatable to his clients by asking them when they want to receive their monthly invoices. Then he schedules his billing so his clients receive their invoices during the week that’s most convenient (or cash-rich) for them.
Offer incentives. Many business owners report that they get paid faster by offering a 5 or 10 percent discount to clients who pay invoices immediately. Offering a 10 percent discount for 10-day payments can really improve your cash flow, and you don’t have to spend time or money calling or rebilling the same clients.
Carry a big stick. Jacquelyn Denalii, a writer in Orlando, Florida, uses the opposite approach. On the bottom of every new invoice, she informs her clients that she posts a “monthly rebilling charge” of $15 if their payment is received after 30 days. Does she usually get the late fees? No, but even when she’s not paid immediately, she usually gets paid very shortly after she sends the second bill with the $15 charge added.
“It’s very important that this be stated as a rebilling fee and not a finance charge,” warns Denalii, or you can run into state usury and finance laws.
Consider color. The Xerox Corporation, which has studied every aspect of document design, repons that invoices that use color to highlight the all-important “balance due” section are paid up to 30 percent more quickly than boring old black-and-white bills. It may not be worth running out to buy a color copier, but if you can, give it a try.
Pick a format and stick with it. It’s most helpful if the last line of your invoice shows the amount owed clearly identified with words or phrases such as please remit. Avoid changing the look of your invoices to avoid confusing your client.
Curtail details. “The more details you include, the more questions you get,” says Thompson, repeating conventional wisdom of invoicers. Tell a client that you are billing for “10 hours of consulting” and chances are you’ll get paid without problems. Take the time to elucidate, however, and you can regret it. Clients that must be told exactly when and how each hour was spent are likely to keep delving deeper, with questions about your time management and the like. You can also fall into a trap of overdocumenting expenses. A realistic approach is to supply the smallest number of details that each client needs to fulfill her own bookkeeping requirements. Start with scant invoices and add specifics as clients request them. Of course, you should always have those specifics to back up your charges.
Find software solutions. A computer-produced invoice can be anything from an individually tailored word-processing form to a document from a top-of-the-line billing-andbookkeeping program. You have to decide what works for you, but here are some rules of thumb.
If you charge only flat fees for projects and have only a handful of clients that you bill infrequently, you can probably get away with a fill-in*the-blanks word-processing invoice that you design yourself. Since many of today’s word processors allow graphics, it should be simple to add your company logo for a professional-quality invoice.
But even if you have few clients now, you may be bigger someday–with added employees and more complicated recordkeeping needs. In that case, consider starting out with a more complex system. Three inexpensive programs that allow you to generate invoices and keep records of the bills you send are Better Working One-Person Office, MyInvoices, and MyProductInvoices. A slightly more complex and costly program is Bill-It.
If you bill in more than one way, such as hourly, by the project, or by percentage markups of goods and services, make sure you find a program that will let you do that. Timeslips is a popular program for entrepreneurs who bill by time. The software is really like two programs in one: an Eggprinting and tracking system, and a time register. You can keep Timeslips working in the background throughout the workday, and it will automatically assign your hours worked to client accounts, as long as you remember to enter a couple of codes and let the program know when you are starting and stopping a job.
If you follow a typical cash-based accounting system, you don’t have to worry about your invoicing program integrating with your bookkeeping program; you won’t be entering funds as income until they are received. But if you run your business on an accrual basis (you incur expenses when you place orders and declare income when you bill it out), it helps to find a billing program that can talk to your money-management program. Timeslips Accounting Link lets you transfer data back and forth with a few keystrokes.
Keep good records. An invoice-recordkeeping system can be as simple as a file of copies of invoices you’ve mailed, with PAID scrawled across those that were. Most invoicing programs will do the work for you, however, so you can always call up reports that tell you just how much you are owed and by whom. That gives you the ability to hound the people who don’t pay. And, of course, to thank the people who do. Those are the clients worth cultivating. .
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