It takes Aussie small businesses almost 2 months to get paid from when they first send out an invoice. Ouch! Cash is king in any business, and without money coming through the door, you’ll find it very difficult to continue operating your startup.
When it comes to getting cash through the door, there are three things you need to focus on:
(1) What will be your process for invoicing
It’s important to decide on a process for invoicing. How many days will you invoice after the work is complete? Will there be an upfront payment component on your invoices? And once you decide on this you need to think through the following:
- Invoices need to look professional – we recommend using accounting software to ensure consistency across all your invoices
- Highlight your payment terms on your invoices – client’s should clearly see when your invoice is due, and not have to go looking for it
- What payment methods will you accept on your invoices
- When will you set aside time to do your invoicing
(2) What do you need to include on your invoices
This is very important, as if you do not invoice correctly, that’s where the big delays in payment happen! On your invoices you need to include the following:
- The words ‘tax invoice’ (“1” below)
- Your business details – including ABN (“2 and “3” below)
- Invoice date (“4” below)
- Description of what the invoice was in relation to – e.g. 2 hours of consulting services at $100/hour (quantity x price) (“5” below)
- Invoice amount – highlighting the GST components (“6” and “7” below)
- The buyer’s details (such as name and address or their ABN) where the invoice amount is for $1,000 or more (“8” below)
(3) How will you chase up the cash
You need to have a process around chasing payment of your invoices. The trick is, the longer you let an invoice go unpaid, the longer it will take to get paid and the more likely that the client won’t pay. So, make sure you start chasing the invoices when they fall due. And if you need a hand with reminder emails, accounting software add-ons can do this for you at a fraction of the cost compared to if you did it yourself.
Remember, a job is not complete until the cash is in the bank. Ensure your startup has a solid process in place to invoice clients and collect the cash.