State laws require businesses of all shapes and sizes to maintain set accounting standards for legal and taxation purposes. Moreover, business owners often fail to realize that a significant portion of their capital tends to get trapped due to inefficient payment and invoicing cycles.
While most businesses have formal policies regarding billing and invoicing systems, they are often not implemented effectively, resulting in payment lags and piled-up credit bills. A large enterprise might remain unaffected by rising credit sales. However, poor invoicing and payment cycles can cause small businesses to become more cash strapped if payments do not come in due time.
However, there are a couple of tips that can provide solutions to everyday accounting and billing issues faced by businesses and their owners:
Tips to speed up your accounting and billing systems
1. Delegate the process to a responsible person
Young entrepreneurs facing time bottlenecks should consider hiring a professional accountant or delegating this task to an existing company employee. However, before entrusting another employee with this sensitive task, the person should be given the necessary training to ensure s/he understands the business’s policies and procedures. Even for businesses that rely on computer software and programs for billing and invoice management, having an employee supervise the whole process frees up extra hours for the business owners. If need be, individuals can skill up by enrolling in an MBA with accounting concentration online to become familiar with these tools and practices and make the process more efficient.
2. Ditch manual grunt work
With digitalization, there are now several online accounting solutions available for businesses struggling with the rudimentary task of generating bills and invoices. While the task of invoicing is essential to any business, it often involves spending hours staring at excel sheets and tallying the numbers with physical receipts. Manually generating bills and invoices is cumbersome and time-consuming; business owners struggle at every month’s end trying to finish the process on time.
It is, therefore, recommended that business owners and entrepreneurs take advantage of software and programs that reduce the pain of crunching numbers and maintaining a record. Equipping the business with the latest accounting tech trends and best practices can save business owners several crucial hours, often spent in manual, labor-intensive tasks.
3. Give incentives for early payments
Depending on the nature of the business or service provided, clients and customers are often extended the liberty of delayed payments for goods and services. When large sums of money are involved, the payment process is usually broken down into smaller amounts to make things easier for the client.
While such a strategy is often helpful in client retention, it can lead to counter-productive results. Some clients do not adhere to the payment deadline. As a result, the business’s cash flow is severely affected, leading to challenges in running day-to-day operations.
On the contrary, offering incentives through discounts on early cash payments can ease the process and create goodwill among clients. This strategy can help solve invoicing and payment collections issues and address the business’s cash flow problems to an extent.
4. Give timely reminders
Having policies in place declaring the terms and conditions of the billing process can save many companies from future cash distress. It is equally important to enforce these terms and conditions on every customer or client without extending undeserved favors. Having set rules in place for billing and invoicing makes a business seem more professional. Setting payment reminders should be an essential feature of the billing system. Notify your clients when they are lagging on payment deadlines or when their payment cycle is due. It is helpful to note that such reminders should be kept polite. You can also pair them with reminding clients of discounts they can avail if they make their payments in cash and in due time.
5. Make invoices more presentable and understandable
Even the most sophisticated accounting and billing systems will be useless if the consumer or client fails to understand the invoice. The invoice should be clear, concise and should reveal all the necessary information. Mentioning the terms and conditions of payment clearly on invoices or bills serves as a reminder and saves the business a significant chunk of time wasted in trying to explain the invoice to a confused client. Due date, payment breakup, and the possible overdue should also be present in an invoice.
6. Consider using multiple payment options
A business might face delays in the repayment of bills and invoices if it relies solely on conventional payment methods such as cash or cheques. The time involved in the processing of cheques or the extra steps required to withdraw cash from a bank and then send the money to pay off bills tends to create a time lag for both the client and the business. Therefore, it would be best to utilize modern payment options and online payment gateways for clients. Several companies offer quick, online payment services that can reduce the hassle of traditional invoicing methods in the payment process.
7. Prioritize automation
After creating an accounting and invoice management system, business owners should divert their focus towards automating the entire process. Starting from the first step, when invoice data is punched in, to the final phase of closing payments made against invoices – the whole process can be digitalized with automation software connected to databases.
Minimal human involvement will reduce the margin of error, create more accurate and quicker reports, and save the time spent on creating invoices and bills manually. Reminders can also be sent on time, while all types of payments can be consolidated in a single report without spending hours.
While every entrepreneur or company’s long-term financial objectives may vary, the above tips can help them improve their accounting and billing systems’ efficiency. However, understanding the status quo, analyzing the company’s internal position against the industry standards, and competitor analysis is crucial. Improvements in the system can only translate to tangible benefits when applied after a thorough examination of one’s own business. Regardless, using the tips mentioned above will come in handy for anyone looking to make meaningful changes and improving their business standards.