Once you've set your credit policy, it's important to
stick to it and do your part to ensure prompt payment. The
cornerstone of collecting accounts receivable on time is making
sure invoices go out promptly and accurately. If you sell a
product, get the invoice out to the customer the same time the
shipment goes out. If you're in a service industry, track your
billable hours daily or weekly, and bill as often as your contract
or agreement with the client permits. The sooner the invoice is in
the mail, the sooner you get paid.
To eliminate any possibility of confusion, your invoice should
contain several key pieces of information. First, make sure you
date it accurately, and clearly state when payment is due, as well
as any penalties for late payment. Also specify any discounts, such
as discounts for payment in 15 days or for payment in cash.
Each invoice should give a clear and accurate description of the
goods or services the customer received. Inventory code numbers may
make sense to your computer system, but they don't mean much to
the customer unless they are accompanied by an item
description.
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It's also important to use sequentially numbered invoices.
This helps make things easier when you need to discuss a particular
invoice with a customer and also makes it easier for your employees
to keep track of invoices.
Before sending out an invoice, call the customer to ensure the
price is correct, and check to make sure prices on invoices match
those on purchase orders and/or contracts.
Know the industry norms when setting your payment schedules.
While 30 days is the norm in most industries, in others, 45- or
60-day payment cycles are typical. Learn your customers'
payment practices, too. If they pay only once a month, for
instance, make sure your invoice gets to them in plenty of time to
hit that payment cycle. Also keep on top of industry trends and
economic ups and downs that could affect customers' ability to
pay.
Excerpted from Start Your Own Business: The Only Start-Up
Book You'll Ever Need, by Rieva Lesonsky and the Staff of
Entrepreneur Magazine, © 1998 Entrepreneur Press