Unpaid or open invoices are a huge problem for many companies. Even small businesses are often burdened by many unpaid invoices that slow down production and stall plans to expand or improve business operations. If you have a lot of unpaid invoices dragging down your productivity and your company’s ability to grow and improve, you need to figure out a solution to improve this process.
There are some key practices that will improve your turnaround time on open invoices. If you use these tips and tricks, you will be able to enjoy freedom from the time wasted on these processes and from having to wait for the money to come in to fund new projects or hire new employees.
If you are ready to learn more about the best practices to increase cash flow and reduce the number of open invoices that your business is attending to, you need to read on!
15 Best Practices to Increase Cash Flow and Reduce the Amount of Open Invoices
1. Streamline Your Workflow
All too often, when a company does an audit to see why invoice turnaround times are so slow, internal workflows are largely to blame. You will need to be sure that you are removing all unnecessary steps from your invoice creation and payment workflows if you really want to reduce the time it takes to finalize the payment on open invoices.
The most critical issue that often holds up the payment of invoices is a complexity that is not needed within form completion and information collection. You should not burden clients or staff with lots of unneeded steps to create an invoice. The creation process can be a huge time drain and annoyance for all involved that you will want to avoid.
2. Integrate Necessary Systems
Many businesses have lots of payment and information collection systems that they are using within their workflows. These systems should all work together seamlessly or reduce the volume of programs you are using for these processes. There will be less room for mistakes when you keep things simple, and there will be a better global understanding of each invoice’s stage.
Having a good idea of what is needed for each invoice to be completed can allow anyone on the phone with the client to close out the invoice by collecting payment. The way that you organize information and connect it can greatly impact the overall success of your invoice creation and closure process.
3. Invoicing Comes First
When you put invoicing ahead of non-critical processes, you will make it much more likely that the invoicing process will be handled correctly. Cash flow can be impeded greatly by a lack of focus on it as an important factor in your workday.
Invoicing and reaching out to customers who have not paid for their open invoices should be the priority of your business at some level every day. This might mean that you need to hire someone just to attend to invoices, or maybe it will become critical to take one day a week for your business to attend to invoicing to keep up. Taking care of your open invoices is not a small part of your business’ success, and you need to be sure that you treat it as such.
4. Make Use of Technology
There are many solutions out there that will make billing and invoicing in general much easier for everyone at your business. Using a quality invoice tracking system can take all of the guesswork out of the process and make it much more likely that you will get your invoices attended to in a timely manner.
Make sure that you look around at the various invoicing options open to you in comparison with your preferred business workflows. This kind of technological backup can make it simple for even a few people to manage all of your invoicing needs each day with ease.
5. Allow for Various Payment Methods
You will need to be sure that you allow all the various kinds of payments that people might want to make. Allow ACH, wire transfer, credit card, paper checks, and Buy Now Pay Later for your business needs. The more ways that you allow people to pay, the more likely you are to get payments in a timely manner.
6. Renegotiate A/R if Needed
If you have been having issues with payments coming in, you might need to look at your payment timeframes. If this is not working for your needs, you might not want to stick with a 90-day or 60-day total invoicing time. You could try out flexible payment timing, or you might want to introduce split payments between different forms of pay to get through your outstanding invoices more readily.
7. Discount for Early Pay
One of the best ways to encourage repayment of your open invoices is to offer discounts for early payment. This is a great way to motivate people to pay upfront or right off, and you will be able to close many invoices much more quickly than if you did not use this method for getting invoices paid.
8. Look at Customer Data
You will want to make sure that you are always looking at your customer data. This will show you trends in non-payment in certain industries or client types, and it might indicate areas for improvement of your own internal processes. There are lots of factors that can be tracked through customer data, and you should be running these reports all the time.
9. Organize Tax Details and More
Ensuring that you have no errors in your invoicing and information collection processes can be critical to getting invoices paid promptly. When you have the right client information in your stored information, the correct payment information, and the right invoicing details in place, you will be able to send out bills and collect payment easily.
10. Go Paperless
People are less and less likely to go to the mailbox to check for a paper bill. Sending out email billing or virtual billing prompts can be a big help for your invoicing turnaround times. You can also offer a discount for auto-pay to help make monthly payments get taken care of readily without having to make phone calls.
11. Automate Processes
The more processes that you can automate, the faster your invoice generation will be, and you will also have access to improved accuracy in your billing. When manual entry can be skipped over, and client information can be transferred to new invoices with ease, you will be much more likely to get paid for your invoices right away each month. Besides this, your employees will thank you for saving them so much time.
12. Review Data Regularly
The more company data you review regularly, the more you can improve processes and remove bottlenecks. Looking at the details for accounts that have not been paid and making sure that you are following up on outstanding invoices properly is key. You will also want to look at the kinds of accounts that are causing issues consistently and work out a way to establish a reliable audit trail.
13. Look at Real-World Costs
When you are looking at all of your data, you will also want to look at the resource cost to add or grow your business. Make sure that you think about how much time and money would be saved by investing in tech solutions that would help you to reduce invoicing times and bring in more capital every day to your company. Making your business more efficient often comes down to the numbers, and you need to know what these are.
14. Audit Overdue Accounts
Often, overdue accounts fall further and further into the background. When someone is not paying their bill, it can be hard to get them to even answer a phone call. You will need to be sure that you have someone on staff who looks at these accounts and tries to get paid for them as soon as possible. You will also need to audit these accounts to see where things went wrong so you can avoid these issues in the future.
15. Train Staff
Make sure that your staff understands the importance of invoicing and collecting payment readily. It can be easy for this part of the daily workflow at your business to fade into the background. However, everyone on your team needs to know that payment matters and that getting it is a big part of their daily workload.
Reducing Invoicing Time and Volume Matters
When looking at the bottom line, you should always be looking at the number of open invoices you have to attend to. You should never allow a significant amount of your income to be tied up in open invoices. Changing your internal practices and working on ways to streamline and improve your invoicing processes can make it much easier to be the black every month.
