For new entrepreneurs and small businesses, knowing what needs to be prioritized in running a business can be complex. With so many responsibilities to manage, it is not unusual to put certain tasks aside.
However, one of the most important responsibilities for business managers is invoice management. Successful management of invoices is the cornerstone for the effective development of a company.
Learn more about the importance of good invoice management, then check out our tips for getting it right.
The Importance of Managing Your Business Invoicing Properly
The invoice process is an essential part of the management of a company. It is also the basis for the development of the company.
First off, good billing management is necessary for business accounting. In order to manage your cash flow properly, you need to know exactly where your money is coming from and going to. By correctly organizing your invoice process, you can quickly identify anomalies in your sales.
Good invoice management is also important from a point of view of corporate taxation. By law, you are required to keep your accounting records and invoices for a certain period of time. The tax authorities (CRA or Revenue Québec) may ask to see your invoices for auditing purposes. It is important to keep them from a legal point of view.
Tips for Successful Invoice Management
Wondering where to start optimizing your business invoice management process? Here are some tips to help you improve your workflow.
Organize Your Invoice Process Efficiently
Organizing your invoices efficiently is the first step towards successful invoice management. Establishing a clear methodology will allow you to have a better overview of your invoice management process.
For example, you can start by developing the rules and procedures for your billing process. This not only helps to put certain processes in order but also protects you legally.
Clarify Your Payment Terms From the Start
When dealing with a new customer, you should be very clear about your payment terms from the start. Not every company has the same billing rules, and the customer should be notified if you have any special terms.
For example, you may charge a fee if a payment is made after the due date. In this case, you should notify your customer, otherwise they may complain that they were not aware of the charge.
Numbering your customers' invoices is another way to improve the invoice process. Without a number, it can be more complex for you to determine whether a given invoice was produced before or after another.
Numbering your issued invoices in a chronological and consistent manner will solve this problem and help you keep your business accounts in order.
Automate Your Invoice Processes
Another way to make your invoice management process easier is by using software that automates your processes. There are several management tools and accounting software that help companies automatically produce their electronic invoices without making mistakes. In addition, when the customer wants to receive a paper invoice, you can simply print it out.
Moreover, these tools save entrepreneurs a lot of time. In addition to automatically generating invoices, they can send payment reminders and automatically record payments made to you.
Check the Solvency of Your Clients
You probably know your loyal customers very well. You know what they buy and you know their invoice payment habits.
But you don't know anything about a new customer who comes to you. Will they pay you on time or will they be late in paying their bill?
Checking the solvency of your new customers is another important tip that our accountants recommend. However, it is always possible to ask for a deposit or partial payment from new clients if you cannot confirm their solvency.
Issuing Invoices Quickly
The longer you delay issuing and transmitting your invoices, the more you delay your cash flow. So, as soon as a deal closes, create an invoice and send it to the customer immediately.
If you are always on the go or selling products directly to your customer, consider using a mobile invoice reader, which will allow you to accept credit or debit card payments contact-free with a smartphone.
Be Professional with Your Customers
Adopting a professional attitude is always important in customer relations. From your first interactions with them, your professional and polite attitude will give them an idea of your management skills.
This should be maintained throughout the relationship with your customers, especially regarding the invoicing process. If they are behind in their payments, you can be insistent, but your communications should remain polite. Remember to use polite language in your payment reminders.
Professionalism is the best way to maintain a good relationship with your customers, even if they are "deadbeats".
Always Claim Your Payments and Follow Up with Customers
Once you send an invoice, always keep track of it. This way, you ensure that you receive your payments on time and, if not, you can send reminders to your customers.
If you have customers that often delay invoice payments, don't hesitate to send them regular reminders. Your payment terms exist to ensure your success. It is important to respect them.
Once again, invoicing software can greatly help you keep track of and manage your invoices. Investing in good customer relationship software would be another solution to consider if you have difficulty keeping track of your business communications.
Invoice Management is a Priority for Small and Medium-Sized Businesses (SMEs)
In summary, good invoice management should be a priority for any business, especially for small businesses and start-ups. Invoice management is crucial for cash flow, accounting and business finances. By following the advice of our experts, you can already start optimizing your processes.
Would you like more advice on business accounting? T2inc's specialists help small and medium-sized businesses in Quebec to better understand their accounting and business taxation.
To obtain the expertise of our tax accountants, send us a request for a quote.