Answer: There are several ways to ensure that your invoices have a quick turnaround.
Try the following:
- Think about your client’s ability to pay. Their reputation, the impact of economic conditions on their organization, and their track record for meeting their obligations are clues to their trustworthiness. If you are concerned, ask them pre-pay a portion. Better yet, avoid the project altogether.
- Structure your proposals for milestone billing. Your client likes this approach because they have regular deliverables. You like it because your project stays on track. Your business likes it because regular payments keep things running smoothly.
- Make billing easy. Create an invoice template. Number invoices sequentially. Make the most of your accounting software. Keep a file folder for each project. Code and file your receipts daily so it’s easy to find them at the end of the month.
- Bill on time. Each day that your invoice is late has a negative effect on your cash flow. If you haven’t been paid because you haven’t sent your invoice, you won’t be able to pay your vendors or yourself. Your client’s 30-day clock only starts ticking when they receive your invoice so until you send it, they are using your money for free.
- Warm up client relations. Get to know the individual who looks after your client’s Accounts Payable. This new best friend can streamline the process for you if you become someone they want to help.
- Track your Accounts Receivable by due date. Once an account is past due, follow up right away. Typical reasons for late payment include illness, vacation, Christmas, budget time, year-end, and system glitches. Sometimes people forget or lose your invoice. Predict these issues, find out where your invoice has stalled, and troubleshoot accordingly.
- Get it in the bank. When you receive a check, deposit it immediately. I keep my deposit book in my car and go directly from the post office to the bank. Even better, explore direct deposit with your client. It’s cheaper and faster for everyone.
Originally published in the Independent Consulting TIG Newsletter, Volume 5, Issue 1. March 2014.
For more information on consulting topics see in Barrington, G. V. (2012). Consulting Start-up & Management: A Guide for Evaluators & Applied Researchers. Los Angeles: SAGE.