For plenty of small businesses, particularly solopreneurs, bookkeeping is an afterthought. However, introducing this attitude into your invoicing process is financially unsound and may even imperil your company’s economic survival; accounts receivable records provide important information about the customer payment policies your business should implement.
Improving business cash flow begins with a payment policy. Many companies ask for a deposit before commencing a major project. You’ve already invested free time in uncovering the customer’s expectations and explaining how you’ll achieve the desired results. Few customers will complain when you ask for a demonstration of their commitment to pay.
Next on the invoicing agenda is establishing when final payment is due. Efficient entrepreneurs deliver invoices immediately upon project completion. They don’t wait to invoice once a month or weekly. Rather, each customer receives an invoice when something is delivered. Period. Don’t hesitate to expect payment promptly. People are accustomed to paying for things at the time of purchase.
Review the status of your accounts at least once a week. Address the slow payers right away. Some customers always pay late. A few will never pay. Distinguish between these two categories and purge the deadbeats. For the slow payers, offer discounts for early payment and implement penalties for paying late. You’re more likely to get paid early, because everyone loves a bargain. The few who don’t pay early will probably never pay, and you’ll know who you should stop working for…permanently.