How can SMEs achieve the most efficient invoicing?

Let OfBusiness help your SME, with few smart tips for achieving an efficient invoicing:

1. Know your customer — This is the first step in setting up a smart invoicing process in place. It’s important to know who at the customer end is handling all the invoicing and finance related matters. Meet them and arrive at a fixed payment cycle plan. Typically, setting up a 30 days payment cycle from the date of billing, is a good arrangement. That way your SME will be able to further pay the vendors/suppliers bills in your committed time.
2. Know your potential client — It’s always a good idea to get information on your potential clients credit history. Your SME can always get the client SMEs credit history from one of the renowned credit rating agencies. This will be just an indicator though, and your SME must still keep a risk ratio. Also as an SME, you must try and analyse if the client is going to stick to the payment commitment cycle and arrange for the fixed sum of money to be paid to your SME; against the invoice raised by your SME.
3. Enter a direct debit option from the start — Whenever your company or SME is starting a new business with a SME client, do not accept a cheque system of payment, as this always gives them a window of avoiding payment release in future. Instead of this, rather get into an arrangement of having a direct debit from the client SME account on a fixed date every month. To further motivate them to get into such an arrangement, offer some discount in the billing amount. This way, your SME will be able to ensure a smooth and timely cash flow for further vendor/supplier payments.

• Apply interest charge on late payments — This one is easier said than done. As the client may try to avoid any kind of additional payment going out. At the same time, it makes a lot of sense to put this as a clause during the initial agreement/arrangement. Hereby, your SME can put both the clauses i.e. Discount on fixed timely payment release, interest charge on late payment.

1. Have an alert system to flag payment delays — Have an alert system integrated in your SMEs finance department/resources, that will always trigger an alert to the Client SME in case they haven’t made the payment on time. This alert must not be a threat call or court notice, but more on the lines of email/postal mail follow ups and reminder calls to the Client SMEs finance department.
2. Raise invoices efficiently — Most of the SMEs end up completing the job on time, but forget to raise the invoice for same. This may seem to be a very small issue, and that’s the reason it’s ignored as well that much. Surprisingly, a survey done by a Cloud solutions company in one of the European countries highlighted that almost 4 billion pound was lost by the SMEs, due to their failure of submitting invoices for the work done by their SME. It’s sad, but true that the SME owners end up focussing all their energies on getting more and more new business, but end up overlooking the finance processes which would actually bring in the actual revenues in to their SMEs accounts.
3. Embrace technology for faster payment options — When sending invoices to the client SME, as a hygiene process, always provide a payment link or your SMEs bank account information, for the client SME to be able to initiate and fulfil the payment promptly. Since the information is made so handy for the Client, it helps them as well to complete the payment.
4. Escalate the delayed payments before they convert into bad debts — There could be certain SME clients, who may end up missing the payment deadlines and still not pay after multiple reminder calls or follow up mails. In that case, as a first step reach out to their higher authorities before taking further action. If there is still no positive action/response from the client side, then write a formal warning letter before taking court action.

What must your SME avoid while doing invoicing:

1. Not keeping it simple — An invoice document is meant to be simple with only the necessary information called out in the document very clearly. Trying to make it visually colourful with an overload of graphics and design will defeat the purpose of an invoice document. It needs to be on clean white background, with key information highlighted in bold or underline. So that it’s very easy for the other SME client to read it through and get the important information quickly for actioning it further.
2. Being stuck with age old methods of invoicing — With the world moving towards more advanced technological and digital modes of working, it’s important that your SME embraces it too. Train your finance team about the new payment methods that they can use it to ease and fasten the invoicing process. Have advanced software’s/tools installed for purpose of invoicing, data storage and payment fulfilment cycles.
3. Take note of smaller things in the invoice document — Always do quick check about basic things like

• correct invoice numbering,
• correct spellings of the client name and Company name,
• correct company address,
• List of products/services invoiced have been tallied properly with business team;

before sending out the invoice to client. These pre-checks will help in avoiding multiple back and forth with the client SME for having the correct invoice in place for payment release.

Hope these tips would help in improving your SME’s internal invoicing process, and make your SME achieve the most efficient invoicing process in place. If you need loans for having a smooth operational cash flow for your SME, OfBusiness is surely an option you must pursue.

Submit your credit application today to procure unsecured loans for business and enjoy better growth opportunities for your SME.

Reach out to us at 1800–102–9586 or mail to contact@ofbusiness.com.

Originally published at www.ofbusiness.com.