One of the most crucial steps in managing a business is accounts receivables(Invoicing). Most people don’t notice this especially when they don’t have a business operation background. Being in a credit-heavy industry like Home Improvement can put you in a tight spot when you have overhead to pay for and a very slow payment process per project. A good solution for this is creating accurate and timely invoices so you can get paid sooner or almost instantly to avoid scenarios of you running out of money to operate your business.
Let’s do a rundown on what you need to properly bill your customers and get paid in the process.
Invoicing Best Practices:
- Sending Timely Invoices
- Making invoices clear and detailed
- Proper documentation
- Realistic and reasonable payment terms
- Don’t be shy about following up on invoices
Every business or in this case a General Contractor must have its own process for invoicing and having run the business for quite some time means you already have an idea of what works best for you. However, that doesn’t mean you’ll stop improving your business processes. Here are some of the best practices based on experience by other Home Service Professionals about invoicing.
1. Sending Timely Invoices
Delayed payments in the business are not news to anyone in the field. Sad but true. Usually what happens is Contractors send invoices after the work has been done meaning and wait till they get paid. The longer time they wait the harder it gets to be paid. Another struggle would be sending late invoices to your customers which stir up some confusion. Some clients may have forgotten if the project has been paid or not and some late invoices might be left in a pile of paperwork. It is best to send invoices immediately while the project is still fresh in their minds and have set aside an ample budget to pay.No matter the size of the project and how long the completion time will be, you can always set up a one time invoice or recurring invoice. MX Merchant has the ability to gather needed customer information and set up invoices scheduled for billing making your life as a Contractor easier.
2. Clear and detailed invoicing
To avoid delays make sure that your customers understand what they are being billed for. This is not the time to be lazy about writing the details of the project. Often times, customers have a hard time understanding the contents of an invoice due to poor handwriting. We’re not saying that Contractors have illegible handwriting but rather they might in a hurry. It’s either they’re rushing or someone (the customer) might be rushing them.Better to maintain a standard invoicing process with a basic format for uniformity and efficiency. MX Merchant makes this very easy on you. You can type up an invoice in a portal on a laptop, tablet, or smartphone which can be sent right away or scheduled to be sent on a specific date to a customer.Don’t forget to include the reference to the quote or the estimate given when you write up an invoice. Any discrepancy could lead to issues along the way.
3. Proper Documentation
Have an organized record of everything relating to any invoice. This includes all of the receipts and timesheets of the team that worked on the project. Documentation is everything! In this industry, you will only get paid for the work that’s been documented and not the work you performed. In case of any issue raised regarding the payment, you can always refer to the documentation to validate the work is done, pricing, and payment terms.
4. Realistic and reasonable payment terms
Normally, invoices have a 30-day credit but for larger companies, it can go as high as 120 days. For a small Contractor extending credit for customers is not an option. This makes it difficult for you to grow your company and accept more projects because you really do need the money. You need to get paid as soon as possible so you can reinvest it into the business. Some small to medium Contractors have a shorter payment term which can be settled with their customers.In order for your customers to agree on shorter payment terms, you should first understand their situation and their capacity to pay for a certain project. However, this doesn’t mean that you would too nice to extend or offer longer payment terms. Again, you need to get paid as soon as possible. Talk to your customers, build trust, and a good relationship with them. This can help secure a payment term that works best for both of you.
5. Don’t be shy about following up on invoices
Following up on payments is so hard to do. We get that. BUT you shouldn’t be shy about following up on invoices. This is money, your money we’re talking about here. So many things can happen to your customers leading to unpaid invoices. They can misplace an invoice, get lost in a pile of documents, ignored for several reasons but it all boils down to the payment being delayed. So follow-up on that invoice via text, call, or email. Reach out to your customers and remind them of the work done and the invoice you sent to refresh their minds so they settle the payment.These are some of the best practices you can apply to your business. If you’re looking for a way to standardize your invoices Payment Pilot can help you with. Give us a call and we’ll get you started right away. No better time to start improving business processes but now, right?
