Billing is one of the most important activities for B2B companies. You can’t get paid if you don’t send your clients an invoice summarizing the services rendered and what they owe you. While there are numerous different ways to send an invoice – through snail mail, email or a third-party online portal – you have to find the billing methods and practices that work best for both your clients and your business operations. Business News Daily spoke with several industry experts about their recommendations on setting up a smart billing strategy.
An invoice is more than a bill – it details all the work you’ve done for a client during a specified time frame. It correlates this work to how much money the client owes you. It specifies payment deadlines and methods. That’s why creating an effective invoice template from which to build all your invoices is among the most important billing best practices.
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Set up clear internal schedules for invoice delivery. You and your team should decide whether to bill clients at regular intervals or after the completion of each project.
If you opt for monthly payments, then automate the sending of invoices on the last business day of the month. If you invoice after each project is completed, then delegate invoice creation, submission and delivery tasks to your team. You can also bill monthly for some clients and on a project basis for others.
Earlier, we mentioned that part of an effective invoice template is establishing which type of client payments you accept and setting firm payment deadlines. In the payment terms section of your invoice, you’ll specify these conditions to your clients. There, you set payment schedules, such as net 30, and specify how you want your payments delivered: ACH payment, check, wire transfer or something else. Without specifying the deadlines and payment methods, you’ll wait longer to receive the client payments you need.
It’s important to set up internal invoice approval workflows. For example, one of your employees might not be aware of client charges that another employee knows well.
In setting up your approval workflow, answer these questions: Who within your company needs to approve invoices? How will you verify that an invoice is accurate? How soon after invoice submission must invoices be approved and sent? With these guidelines established, you should be able to send error-free invoices on time.
While not necessarily a requirement among billing best practices, offering discounts for early payment can help increase your cash flow. Don’t set your discounts so high that you lose money, but a 2% or 3% discount likely won’t substantially decrease your revenue.
Raj Narayanaswamy, co-founder and co-CEO of employee time-tracking solution Replicon recommended that you automate billing whenever possible.
“The quickest and easiest billing is done online,” Narayanaswamy said. “Invest in an invoice/billing generation engine to automate the process and remove human error. Manual billing that relies on tracking down and collating paper timesheets, entering information in Excel, and manually checking for accuracy wastes valuable administrative time.”
Mitch Rose, senior vice president and general manager of payment solutions company Billtrust, added that incorporating electronic methods that help automate the invoice-to-cash process can prove beneficial in the long run for both accounts receivable and payable.
“Moving to digitization allows customers to pay whenever and wherever they are, which encourages faster payments and increases efficiency for your customers and your A/R team,” Rose told Business News Daily.
He added that digitizing payments and invoicing saves on costs. Moving these processes so they are online saves postage, paper and printing costs, and time.
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It’s important to find an accounting solution that gives you and your team the ability to stay organized and monitor all of your outstanding invoices.
“Without access to a centralized view of invoices and bills, companies lack the ability to quickly determine what average payment time is, how much money is outstanding, how many invoices and follow-ups have been sent, which companies are frequently delinquent, and so on,” Narayanaswamy told Business News Daily.
If you accept electronic payments from your clients, it’s critical that your payment processor is compliant with Payment Card Industry (PCI) data security standards. These globally recognized standards were created to protect consumers’ data. Rose stated that compliance with PCI standards is mandatory for any company accepting credit card payments.
“Not only is PCI compliance crucial for legal reasons, it also engenders trust with your customers,” he said. “Businesses that have been breached see a loss of customers, damaged reputations, and drops in stock price – not to mention the exorbitant costs to remedy the breach and then handle post-breach fraud claims and loss of revenue from customers.”
Rose added that compliance is more important as businesses increasingly use credit cards in B2B. Most companies use third parties that provide the payment portals and processes that allow them to accept electronic payments and be PCI compliant.
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Clear communication during each phase of a project keeps clients and businesses informed about payment expectations.
“Understanding the level of invoice detail a client needs from the beginning, creating proactive plans in case of scope creep, and keeping clients updated each step of the way can save considerable time and effort during the actual invoicing process post-project completion,” Narayanaswamy said.
Additional reporting by Max Freedman. Some source interviews were conducted for a previous version of this article.