Many businesses look to their accountants for solid advice on running their businesses. But even accounting firms can struggle with the kinds of issues that other companies face. For instance, like many business owners, accountants can get so wrapped up in their work that they lose track of important administrative tasks.
Billing is one of those tasks that can get lost in the shuffle of day-to-day work. And yet, billing is one of the most important things a firm can do to keep themselves cash flow positive. A positive cash flow is important all year long, but critically so during the busy tax season, when extra help and long hours can be a drain on both your team and your bank account. But without solid billing practices in place, you can lose the momentum needed to bring in payments in a timely manner
Of course you want to do good work for your clients, but did you know both the quality of work and your delivery can impact when and how much clients pay?
If, for some reason, work is sub-par, clients are less inclined to want to pay for it, or may try and negotiate a lower rate. They may even delay payment, or not pay at all until pestered to do so, reasoning that the work isn’t worth what they are being charged. Good quality work prevents those kinds of discussions from even coming up.
The same is true of work that isn’t completed on time. Work delivered late leaves the impression with the client that they are not a priority to your firm. If they aren’t a priority for you, why should they make paying you a priority? To keep your income flowing, ensure you aren’t giving clients a reason not to pay you, or a window of opportunity to dispute how much you’ve charged them.
This is probably the most important, and most challenging, strategy for getting paid on time from clients - invoices must go out on time, and they must be accurate. Time entry and invoice creation are crucial to positive cash flow.
Accounting firms aren’t the only ones that struggle with this, either. Professional service organizations, from lawyers to business consultants, wrestle with getting staff to do regular time entry. But it is critically important for accurate and timely billing. If partners and billable seniors don’t have the time to enter their hours daily, have support and administrative staff help them by collecting what they have worked on and entering it for them. It is almost impossible to remember at the end of the month how many hours were spent on a project or account from the beginning of that same month.
Entering time regularly also means invoices can get out quickly, which in turn leads to more consistent payments from clients.
When working on a project, aim to send the invoice along with the completed work. A client is more inclined to pay a bill when they have the high-quality product in their hand, and they see the value in what their money has bought. Invoicing later means the project is no longer top of mind for the client, and that lost time can mean they have also forgotten how important the work you’ve done for them was. Also, delays in invoicing signal to the client that you’re not overly concerned about when you get paid, so why should they be?
One more item to consider that can increase the speed at which you get paid—and improve your cash flow—is enhancing your invoices and payment methods. The right amount of detail, presented in the right way, and with easy payment options all increase the likelihood of getting paid quickly, and with little or no follow-up.
When creating an invoice, you should include a breakdown of what was done on the project or against the monthly fee or retainer. The additional detail makes the client aware of all the work that was done on their behalf. It is human nature to want to feel like there is value in what you’re spending money on, and detail on the invoice makes it easy to see the value of your services.
For some larger accounts, you may need to adjust your invoices to meet their billing requirements. Because the company may have a strict process for payment, if your invoice doesn’t meet their prerequisites it may get bumped to receive “special handling.” Unfortunately, special handling does not mean you get paid faster. In most cases, it means they will set it aside until they have finished with all their other payments, and have time to address your specific case.
But one of the best ways of making sure your invoices are paid quickly is by ensuring convenient payments are possible. In the 2014 PCPS/TSCPA National MAP Survey, only 64 percent of accounting firms accepted credit cards. However, as of 2015 there were 13.9 million small business credit card accounts that accounted for $430 billion in spending. If you’re not taking credit cards, you’re making it harder for your clients to pay. If you are accepting credit cards, you’ve got an advantage over your competition.
When looking to evolve your payments, look for a partner that can help you accept the kinds of payments your clients want and need to use. Accepting credit cards and eChecks gives clients the flexibility to pay you in ways that are simple for them. And with some payment partners, funding of payments can happen more quickly, giving you even greater control of your incoming cash flow.
Invoicing and bill payments go far beyond simply submitting a bill to your client. When you bill them, how you bill them and how you allow them to pay can make a difference in the speed at which you receive payments for your services.