This is a guest article from our friends at Patriot Software.
You just completed a major construction project for a client. Sure, you received a partial upfront payment. But now, it’s time to collect the rest of your hard-earned cash. So, you give the client an invoice, and then … crickets.
One week goes by. Then two. And finally, the day before the due date (30 days after you gave the invoice), ta-da! You receive payment. And sometimes, it’s not until a few weeks after the due date.
In business, you want to limit any situation that hurts your cash flow and bottom line. Read on for invoice tips to help speed up customer payments.
4 Invoice tips that can help move things along
When you work on a project, no matter the size, you want to receive payment before–and hopefully well before–the deadline. Try the following tips to speed up customer payments.
Ensure complete and accurate information on the invoices
Invoices vary, but one thing remains the same: They should all have key standard information that tells the recipient everything they need to know.
Include the following on your invoices to prevent confusion, late payments, and incorrect payments:
- Invoice date
- Contractor information (e.g., your name, address, email, etc.)
- Customer information (e.g., name, address, etc.)
- Goods and/or services purchased, and the price of each
- Total amount due (don’t forget sales tax, if applicable)
- Payment terms (we’ll cover this in the next section!)
- Invoice number (this will make it easy to find in your business records)
Ensuring that much-needed information is included and organized correctly will help your construction customers understand their responsibilities. To help, refer to invoice templates online or ones you’ve received. If you use accounting software, the system may have customizable templates for you to use.
Establish clear terms and conditions
Create (and detail) terms and conditions revolving around your client payments, including everything the client needs to know to pay you, such as:
- Payment due date
- Forms of payment you accept (e.g., credit card)
- How clients can pay (e.g., online, over the phone, etc.)
- Whether you offer an early payment discount and how much
- If there is a late payment fee when it applies, and how much
Once you establish clear terms and conditions, communicate them early on to your clients. Make sure they know your terms and conditions before you send the invoice. Then, remember to list them again on the invoice.
Embrace e-invoicing
E-invoicing, or electronic invoicing, is a convenient way to bill clients. When you send out electronic invoices, you don’t have to worry about printing and mailing, along with the associated costs (e.g., stamps). And, e-invoicing can limit client claims that they threw away or misplaced their invoice.
An e-invoice is a digital version of a traditional paper invoice. To further speed up customer payments, give customers an easy way to pay their bills online when you email them their invoices.
Take advantage of automation
So, how can automated invoicing help construction businesses? It can save you time, limit mistakes, and streamline the invoice process from start to finish.
Through automation, like accounting software, you may be able to:
- Quickly and easily create invoices
- Seamlessly convert estimates to invoices
- Send out automatic payment reminders
- Set up recurring invoices
- Use customizable invoice templates
- Track and manage paid and unpaid invoices
- If you decide to use automation for manual work, enjoy the extra time you can use to focus on your construction business.
The golden rule of invoicing: Keep your cool
Optimizing your invoice process is a great way to help speed up customer payments—without severing your relationship. But if these invoice optimization tips still result in a late-paying customer, there’s one last tip to keep in mind: Keep your cool.
Dealing with a customer who won’t pay is frustrating, and it may even mess up your cash flow and make you teeter on the edge of becoming a late-paying customer yourself. But, it’s not worth burning bridges or jeopardizing your business’s reputation.
When dealing with a late-paying customer, try to be patient and empathetic. They may have forgotten to pay (despite your invoice reminders!). Or they might be struggling financially. If you have a customer who can’t afford to pay their invoice in one lump sum, you might consider setting up a payment plan (e.g., 30/30/40).
If you have a customer who ignores your payment requests, remain professional. To help you collect money owed to you, you may decide to go through a collection agency.
Rachel Blakely-Gray is the Content Manager at Patriot Software, LLC, a provider of affordable online accounting software and payroll for small businesses. At Patriot, she enjoys providing actionable, growth-oriented information for small business owners.