Customers who pay late can really throw a wrench into your company’s cash flow. But that’s not the only thing that can slow down cash flow velocity and make it harder to run your business.
The sooner you bill, the sooner you’ll get paid—even by those late-paying customers! It’s a simple yet important principle.
Let’s look at several of the most common contract & billing mistakes:
1. Generating inaccurate invoices
It’s essential to bill for the right amount, at the right time, and with a sufficient amount of detail for customers to review. Anything less can negatively impact customer satisfaction. So it makes sense to have effective automation in place to ensure your invoices are accurate and timely.
2. Creating customer billing shock
Don’t surprise customers with your bill. If customers normally receive invoices of the same value on a recurring basis, they get used to that amount. If one month you’ve performed some additional services and the invoice is much higher than usual, you need to call the customer before mailing the bill.
Failure to do so can lead to sticker shock! But a well-timed phone call to let the customer know a larger invoice is coming gives you a chance to remind them about the services or products they received.
eBook - Learn to capture and bill for more time. Get Guide
Learn to capture and bill for more time.Get Guide
3. Lacking well-defined billing standards
Billing customers in different ways or at different rates can lead to inaccurate invoices and create customer confusion. The best way to avoid these problems is to define your billing processes. Choose how many different rates you will have (too many rates confuse customers), create a specific billing cycle, and define your billing time so that customers can expect your invoices consistently.
4. Collecting in arrears
Taking too long to generate invoices means you are always billing in arrears. Timely billing helps you increase cash flow velocity and avoid issues with financial reporting, so you can guide your company down the best financial path.
It’s also considerate. Customers work within a budget and need to pay invoices in the same cycle as expenses were incurred. Late invoicing can look sloppy; customers trust you to provide real-time services and may wonder why it takes you 6 months to generate an invoice.
Even if your company has committed one (or several) of these billing mistakes in the past, don’t stress. Nearly every business faces these challenges at some point. Stay tuned for 3 More Billing Pitfalls to Avoid in our next post.