Are Your Invoicing Practices Affecting your Cash Flow?
Cash flow has been described as the lifeblood of small businesses, and for good reason. Without steady cash flow, your small business could quickly get behind on payroll, it could be short of funds to purchase raw materials, and you could lose out on growth opportunities. Yet, some companies negatively impact this crucial supply of funds by making critical invoicing mistakes that directly affect prompt payments. Here are some of the ways that can happen.
Allowing clients to pay late
As soon as some of your clients discover that you don’t charge any penalties for paying late, they’ll take advantage and stretch out payments, or they’ll pay another supplier first, who does charge late fees. What that means to you is that revenue you’ve been counting on, may or may not come in within 30 days, or 60 days, or even 90. That’s how cash flow problems begin, and that’s also how they get worse. Don’t be bashful about charging late fees – your business might literally depend on it.
Getting paid late is bad enough, but if you invoice your customers late, that’s unforgivable. There is no way you’re going to be paid for goods or services without first issuing an invoice, and when that invoice is delayed, you can count on any payments being much more delayed. The big difference between this scenario and the one above is that you would be the direct cause of the lateness.
Mistakes in the invoices
This can be a huge time waste, and in some cases, an even bigger impact on your cash flow than either of the scenarios above. Some clients who spot mistakes on the invoices you send them, will refuse to pay them outright because they’re simply incorrect – and you can hardly blame them. Even the reasonable clients will contact you to point out the errors, and request that a corrected version be sent out. All that translates to time, and it means there will be a definite delay in you getting paid the proper amount – if you ever get paid at all.