In our blog post this week, we start a series looking at the three key steps that businesses need to tackle to get their business finances sorted. And as part of our ongoing work with the business community, we presented these topics at The Entourage Scalable & Saleable Program in October 2014.
And our focus in this blog post is on invoicing and getting cash through the door.
Step 1 – How to ensure that you’re invoicing and getting cash through the door
Cash in any business is king. And it is so important that you should have a process for it. Why? One key fact around invoicing demonstrates this point:
- Debtor days is almost 2 months (54 days) for small business. That means that after small businesses make a sale, it takes them this long to collect the money. Ouch!!
Some of the things you should be thinking about when invoicing:
- Will you invoice when a service is performed and if so, within how many days?
- Will you invoice upfront before the work is performed – hold the clients credit card or ensure that you receive payment before the final product is delivered?
So when setting up a process for invoicing, how will your invoicing get done?
- Set aside time to do your invoicing – how regularly will you invoice?
- Keep records to substantiate e.g. hours worked if questioned. Back yourself. Your time is worth $$$
- Invoices need to look professional so you are taken seriously. also be aware that if you are starting your business, you may not be required to register for GST. However, clients will know you are small if you don’t include GST on the invoice so consider the pros and cons associated with this registration
- What payment methods will you accept – credit card, paypal etc
- Be clear on your payment terms and have them stand out on your invoices.
What are some essential things that your invoices need to include:
- That it is a tax invoice by including the words ‘Tax Invoice’ on it
- Who you are (your business) – ABN
- Date of invoice
- Description of what the invoice is in relation to – i.e. quantity x price
- Whether GST (tax) is applicable and to what extent
Don’t waste your time doing your invoicing manually, there is software out there to help you manage and track this. Also consider software that sends out automatic reminders when invoices have not been paid on time and include this as part of your process.
This blog post is part of a three part series on managing your business finances.