Almost every small business that offers a billable service relies on the power of a single piece of paper or e-paper, the invoice. Without it, hours of time and effort would go unrecorded and unbilled. An invoice makes it possible to remind the client about the work done, how much is owed, and when it is due.
Invoices provide small businesses the ability to get paid in a predictable way. Let’s take a closer look at what makes this tool we all take for granted so effective. There are many types of invoice systems and you have to pick one that is right for you.
Choosing An Invoice System That Works
When you first start a business, it takes time to get your first customers. However, after some time, you might find yourself missing payments and losing track of work completed. Before this happens, implement an invoice system for small business. There are various invoice software and programs available. You can choose an online web based invoice system or a more advanced premium invoice software. Many times, these features are included in free accounting software too. However, its up to you to find one that works for your business. Once you have an invoice system in place, here is why you should use it right away.
5 Good Reasons To Use An Invoice System
1. Invoicing systems ensure that you get paid.
The first and most obvious reason is that it is an excellent way to get paid. It is especially useful if you work remotely and offer a digital service. In this case, sending out an e-invoice is as simple as the click of a mouse button. You also offer clients multiple ways to pay you.
2. Invoices allow you to keep track of your business.
At any time, you can review the cost of doing business with the revenue you receive from it. This analysis is useful for figuring out what expenses to cut, what services to add, or what prices to change. You will also know when to follow up on any unpaid money owed. If you have multiple clients, it is easy to let a few payments owed slip through the cracks. You can also avoid the embarrassment of emailing or calling a client who has already paid.
3. Invoicing builds a better client relationship.
There is no ambiguity about what the client is paying for because you will list either the number of hours worked or the type of projects completed for an agreed upon sum. The client cannot accuse you of overcharging because it is all spelled out. Since there is a clear understanding between both parties, you build a better client relationship based on accountability.
4. Invoicing marks your business as more professional.
This is especially true if you run a micro-business , a business with less than five employees. Certainly, there are other ways of asking for the money you are owed. You can ask in person, make a call, or send out an email, but these give your business a casual appearance, and it is difficult to convince your customer that they are dealing with a professional if you don’t even keep records of what is owed, why it is owed, how much is owed, and when it is due.
5. Invoice systems ensure cash flow.
You can predict when money is coming into your business based on the terms of arrangement you have made with your customer. This can range from immediate payment to two weeks, a month, two months, or three months. Additionally, if you can’t get paid immediately, you can use a service like TBS invoice factoring to have plenty of money to run your business. Here is how the capital funding business explains their invoice factoring service:
“TBS Capital Funding gives you cash on the day you invoice your customer for the job or service you completed. We wait to get paid so you don’t have to.” Does this mean that they are giving you a loan? Actually, invoice factoring is not a loan at all. According to TBS, Factoring is not a short term business loan. There is no debt to repay, your personal credit is never an issue. TBS provides flexibility so you don’t have to be concerned about monthly minimums or fees for services you don’t need. Factor as much and as often as you need in order to maintain the working capital required to run your business. Small business factoring is a straight-forward, easy way to keep cash-flow steady.”
2 Legal Benefits of Invoicing
According to an article by Madison Garcia, on the importance of invoicing, invoices can do more than get you paid and keep track of your billing. They can also serves two legal purposes:
1. Invoices establish your legal right to get paid.
You are providing evidence about your right to be paid for products or services offered to the client. Should the customer decide not to pay you, your contract and invoices can be used in a court of law to establish that you had a formal business arrangement with the client. In addition, if you paid contractors or vendors to help you complete services for the client, you can use their invoices to establish that you fulfilled your side of the contractual obligation.
2. Invoices can also be used to defend yourself against an IRS audit.
Garcia explains, “Even if you do everything right, there’s always a possibility your business could be audited by the IRS. During an audit, the IRS wants to ensure that you’ve properly reported all income you received during the year. If you have an organized system of sequentially numbered invoices, the IRS has more confidence that you’ve reported income fully and correctly. If invoices are erratic or nonexistent, the burden of proof is on you to show that you aren’t hiding any income.”
While it is possible to get paid through other channels, nothing is quite as effective as an invoice. If you are not making invoicing an essential cornerstone of your business, now is the time to add this quintessential tool to your business system.
Image from https://www.cloudbooksapp.com/blog/get-paid-on-time-tips-to-collect-your-invoices/