Maintaining a healthy cash flow through your business is vital. It a staggering fact, but the average small company is owed £36,000 of unpaid invoices. Late payment is still rife in the small business sector, but you are not powerless to act.
One of the best ways of minimising your business' exposure to late payment is to ensure that you invoice promptly. Many businesses fall down on this essential component of their money management.
The average business experiencing late payment now has to wait 43.4 days beyond payment terms for their invoices to be paid – northern businesses are waiting even longer, with an average delay of 46.8 days before bills are settled, according to Bacs.
Mike Hutchinson from Bacs said: "Our newest research demonstrates that even more small businesses are facing difficulties with late payments, with potentially serious implications for their businesses. Cash flow remains key for companies to stay afloat during challenging economic times, yet there does seem to be a growing culture of delaying invoice settlement until long past the due date."
Many of the business functions you take for granted have been migrating online. Today there are several online accounting and invoicing services that make use of SaaS or Software as a Service principles, that in effect move your accounting and invoice generation from your PC's desktop onto the cloud. This frees you to manage your business' invoices no matter what your location, as all you need is an Internet connection and a browser. And of course you can access these services from your smart phone or tablet PC.
Most of the current online accounting services offer a free account to get your business started. Draw up a shortlist and then open a free account on each. You can then see how each system operates. You could create fictitious clients and generate a few invoices to see how this is done, and test whether the platform suits the way you like to organise the invoicing for your business.
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Choosing a cloud invoicing service
Most of the current online services offer basically the same set of features that help you generate and then manage your business' invoices. It's important to look closely at the feature set on offer from the services you want to test. Before you buy a service ask yourself these questions:
- How much disruption could a move to an online service cause?
- Do you have any legacy accounting systems you have to use? If so, which of the online services are compatible?
- Talk to your suppliers and customers before you move to online invoicing to ensure they can accept these invoices into their systems.
- Does the system give you a clear escalation path when invoices become late? Can you generate reminder letters?
- Ensure you talk to your accountant before making the change to online accounting. They will still need access to this information when your accounts are due.
- Take your time to look at each system you think could suit your business. Look at the flexibility on offer and the security that is built into the platform.
- Does the service offer an audit trail? This includes all the past invoices from a client or customer. This information is important to track, as this is usually used to decide whether further credit is given.
- Can the system interface with established accounting packages such as Sage?
- Is it possible to generate statements that list all the outstanding invoices and their due dates?
- Does the service allow invoice details to be exported to Microsoft Excel? This can be useful when analysing your business' current invoice status.
The number of services available can be bewildering. Take your time to list what your business needs from an invoicing service. Once you have this information drawing up a shortlist of services shouldn't be a problem. Using their free trials will then allow you to test each one before deciding which one to buy.
Invoice layout and content
It's also important to ensure the invoices that your online service generates are complete. In many cases, invoices are delayed simply because the invoice was missing some vital information. All of your business' invoices must contain this information:
- Your business' name and address.
- The name and address of the company you are invoicing.
- Each invoice must have a unique invoice number. Never reuse invoice numbers, as this leads to confusion.
- The date of the invoice. This is called the date the invoice was 'raised' and usually begins your business' stated payment period.
- List of products or services that the invoice relates to.
- The total amount due.
- The payment terms of the invoice.
- Limited companies must also include their company number.
- If your company is registered for VAT, your business' VAT number must be show. The amount of VAT charged on the invoice must also be shown as a separate line on the invoice.
If your business has already moved some of its office applications online to reap the benefits that the cloud can bring, also moving your business' invoicing online could improve your overall invoicing efficiency and reduce the level of late payment in your business.
Some of the leading online invoicing applications include: