As a business owner, you can’t afford to have cash flow disruptions. You might not have enough money to cover bills for either your business or your personal needs. And when these concerns become too commonplace, it’s easy to let them interrupt your business practice.
Fortunately, you don’t need to let your cash flow become a burden. When you follow these four key billing steps, you’ll be able to boost your cash flow this month and maintain your confidence.
1. Don’t Wait to Send Invoices
If you’re too casual with your approach to sending invoices, you could pay the price. Don’t delay when it’s time to send an invoice. Instead, send them as soon as a project is finished. That way, you’ll alert your contractor or provider that the payment will be due soon. And you won’t be as likely to hit cash flow snags.
Set an alert in your project management software or email as a reminder to fire off an invoice the same day a project is complete. Use clear, declarative language in your email communication. And include pertinent information, like your business name, payment amount and method, deadline, and contact information. Break down all costs, too, to help avoid potential questions and expedite the payment process.
Invoice templates can help create clean, readable, and professional invoices for your clients. These templates use logical layouts and enable you to embed your logo and personalized messages in each one. You’ll minimize the potential for mistakes, and you can even automate invoices for repeat clients.
2. Be Clear About Payment Deadlines
You don’t want to create any ambiguity regarding payment deadlines. Doing so could hurt client relationships. Be upfront before a project begins so clients will know when they need to have money ready once the project concludes. Write this information in a formal contract and specify a date or number of days following the invoice date. That way, there won’t be any confusion, and hopefully there won’t be any delays.
You might want to require upfront deposits of around 50% before starting work, especially with new clients. Consider setting smaller timeframes for repayments to boost cash flow. For instance, 14 days may make sense for recurring clients. You’ll help establish clear expectations for your working relationship and protect your business.
3. Establish Late-Fee Terms to Encourage On-Time Payments
Despite anyone’s best efforts, it’s possible to overlook a payment deadline. But if you outline late fees on the front end, you might help prevent late payments. After all, no one wants to pay extra money. Make sure you include language on your contracts and invoices specifying late fee terms. You don’t have to use threatening language, but it is best to be clear.
Send a follow-up reminder a few days or a week before a payment deadline. If a client misses a deadline, follow up with a note where you indicate that the deadline has been missed. Ask the client if they have questions or need help making the payment. After another week, follow up again with the late fee added to the invoice. Your business, business plan, and cash flow can’t afford to let payments slip.
4. Provide Payment Plan Options
Understand that your clients may have cash flow concerns, as well. If they miss a payment, it could be due to financial concerns. They may not have the cushion to pay the full price at one time. You can help them and ensure you receive your payment by offering structured payment plans. Your clients will appreciate the gesture.
Tally up your client’s total amount owed and divide it into a few monthly payments. Set payment deadlines each month to keep the payments on track. Set up reminder emails so you can confirm that you’ve received each payment by the deadline. You’ll be able to hold your client accountable without straining your relationship with them.
Improve Your Cash Flow Situation
Taking steps to improve your cash flow situation can help speed up payment times. Use professional invoices, set up email reminders, and provide repayment plans. When you’re clear about payment terms, you’ll create more reliable payment schedules and avoid long stretches without income. As a result, you’ll enjoy more stable financial numbers that allow you to grow your business.