Not having the right processes in place around invoicing and cash collection can have a huge impact on a businesses cashflow. Even just late payments can put a strain on the business.
A lot of businesses think that a large client is a good client but if they don’t pay you on time, or it’s a fight each time to get on their invoice list then they aren’t a good client for your business! If you’ve done the work you need to be paid for it. Having said that, if you don’t have the right processes in place around invoicing and cash collection then you are making it hard for yourself and potentially strangling your business of cash.
What cash processes should you have?
Most invoices for monthly tech support can be scheduled using a cloud based accounting package e.g. Xero and the cash collection automated using GoCardless but we often see IT businesses who haven’t taken the time to put this in place meaning they have to employ someone to chase invoices for them – more time and money in the long run.
Automation in the process can ensure cash is consistently collected rather than invoices building up and being chased only when a business feels the squeeze.
Basic processes every business should have in place are:
- issuing the invoice in a timely manner, automate this where you have a set fee per month
- send regular statements – it’s a polite reminder that your invoice needs to be on your customers payment run that month
- make regular contact with customers at an early stage to highlight any potential issues that might delay payment. If it’s a big project and the invoice is substantial, a call to check everything is ok and that it’s scheduled for payment will flush out any potential issues and allow you to get paid on time
- Use direct debit collection for regular amounts – it’s easy to set up on GoCardless for instance and means that the regular amounts come in without you having to do anything, easing your monthly cashflow
Using a system like Xero to raise your sales invoices means you can email them out directly to the customer and send out statements at the push of a button. You can also set up payment methods to help you get paid quicker. If you would like to explore the benefits of automating your invoicing and cash collection process, and understand how this can ease your cash flow pressures contact us and we’ll be happy to help map out a process that works for your business and start the implementation process for you.