Invoice collection is an issue for the majority of businesses. In fact, as many as 30% of SMEs report that unpaid invoices harm their operations. Furthermore, the average small business owner spends around 15 days chasing unpaid invoices, while 40% of businesses say they simply can’t afford the resources to even begin chasing those payments.
Those are some shocking statistics. But, why are these payment issues so rife? According to the same study, around 61% of late payments are a result of incorrect invoices.
Perfecting their invoicing processes is one of the best improvements a business owner can make. Mainly, mistakes include things like incorrect or missing information and, in some cases, a failure to send invoices at all, highlighting the need for clearly outlined invoicing procedures.
Another issue that arises time and again is that of unclear payment terms. Too often, companies will include vague payment terms such as ‘by the end of the month’ or ‘as soon as possible’, which leave both parties at a loss and make missing payments more likely. Putting clear, logged delivery dates on your invoices is the best way around this, and we’re going to consider why.
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Simplifying Your Books
If your invoices don’t have a clear payment date on them, you won’t know which month to file them under. This makes it more likely that invoices will go missing. Your books will also be all out of sync if you file an invoice one month that isn’t paid until a month or two later.
But, with a clear payment date, you make it far easier to both keep track of your invoices and to file them in the right places for simplified, updated bookkeeping at all times.
Accelerating Your Collection Efforts
A failure to collect customer payments is one of the main reasons why businesses could find themselves facing a cash flow crunch, as income will never match output in this instance. Yet, with vague invoice payment terms, payments are more likely to take longer, and it’ll also take longer for you to realize that they need chasing.
By comparison, invoices that are clearly dated make it more likely that customers will complete their payments fast. It also means that, as soon as you get to a week or more post-invoice date, you’ll know straight away which invoices haven’t been paid, and can chase them up promptly.
Adding an Element of Professionalism
Ultimately, your invoices are business documents, and business documents should be concise and sure of themselves. If your invoice dates are vague and unclear, it’ll make it look a lot like you don’t know what you’re doing.
As well as damaging your reputation, that makes it more likely that customers may try to avoid payment. Instead, placing clearly outlined and planned payment dates shows that you’re a successful, organized business operation that’s liable to notice a missed payment as soon as the issue arises.
Allowing for Financial Planning
On a purely operational level, not knowing when you can expect your payments will make it incredibly hard to plan your finances. As with slow collection efforts, the sporadic and unclear arrival of payments particularly leaves you at risk of a cash flow crunch when you struggle to afford materials while awaiting too many outstanding payments.
Not to mention that, if you’re planning for a big job or sales period, you may struggle to plan based on finances that haven’t materialized yet. Even if the dates you place on your invoices are a few weeks away, having that clear financial goal in mind will make it far easier to understand what your finances will look like moving forward, and therefore where you’ll be able to spend without feeling the sting.
Holding Your Customers Accountable
As a business, you want to keep your customers onside, which is why it can be tricky to find the right balance when chasing up invoices. This is especially true if you leave payment dates open to interpretation, as customers may feel unexpectedly bombarded, or even embarrassed, which is sure to damage your reputation.
By comparison, clear dates mean that you’ll be more easily able to hold your customers accountable without risking offense or reputational damage. This can make a world of difference in ensuring both the repeat custom and word of mouth that continue to make a huge difference to all companies.
Payment dates are a simple addition to your invoices, but they’ll surely make a huge difference to your payments and operations for these reasons and more. So, for all future billing, remember to include delivery dates on your invoices.
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