What is the key to an SME managing the invoicing process?
Research has shown that SMEs spend a staggering 130 hours each year chasing late payments, waiting a full 30 days beyond the agreed term on their invoice before receiving their payment.
To help SMEs keep a track of their payments, and keep cash flow running through their business, here are some top tips for managing the invoicing process.
Factor in late payments in the cashflow forecast
A cashflow forecast should include a ‘worst-case scenario’ to outline how the business will be impacted should the business struggle to settle a number of late invoices. An action plan should also be put into place to identify the pre-emptive steps the company could take to avert this situation.
Put systems in place for chasing outstanding invoices
Putting a system in place for chasing invoices, including a system for resolving disputed invoices, will help businesses to maintain control over the invoicing process.
This could involve a follow-up call once the invoice has been sent out, and a standardised invoice reminder template that can be utilised when payments are overdue.
Build up a positive relationship with customers
To encourage your customers to make payments on time, you may want to consider putting a payment discount in place if invoices are paid immediately or within 14 days.
You can also help to facilitate the invoicing process by asking customers what they need on an invoice to process it quickly.
Ensuring that all details such as purchase order numbers, quantities and prices are correct will also help to prevent any delays in the payment process.
Consider invoice finance
If your business is struggling with its cash flow management, then you may want to consider turning to invoice financing, allowing you to raise cash against your invoices, including raising funds against single invoices in some cases.
However, it is important to remember that you will pay interest on any funds you borrow.
To get your business back on track, you may want to seek professional advice on financial restructuring options.