Incredible though it seems, a recent survey I came across suggested that in the UK, SMEs could be losing up to £3.7 billion a year simply by forgetting to invoice for goods or services provided to customers. Apparently one in five SMEs admit to having forgotten to invoice for goods or services at least once.
Which led me to have a look at my own business and ask myself the question – have I forgotten to invoice a client ever, and if I did, would I ever know about it?
Well, I don’t recall a case when this has happened to me, but it is quite possible. I suppose I do have the slight advantage that in my line of work, I tend to get to review client accounts and so if I hadn’t, say, invoiced for a previous piece of work, I would at least be in a position to spot this. But this is not a luxury many businesses have, where they do not have repeat business with customers. Besides, spotting it after the event is not the answer (very difficult to go back and request payment once the service you have provided is out of your customer’s mind); preventing it from happening in the first place is the key.
So how to go about this? Good systems and processes have to be the key, so here are some thoughts on what those might be.
- Have clear ownership for invoicing within your business. Know whose responsibility it is to both raise the invoice and, most importantly, collect the cash. This might not necessarily be the same person
- Know when exactly an invoice ought to be raised and raise it promptly. Customers resent paying invoices which arrive late and are more likely to question their validity
- For longer-term contracts, try to agree to an invoicing pattern which bills up front for work. Besides being best for cashflow, it provides leverage if an invoice is not paid on time
- Systematise your operations flow, including invoicing, wherever possible. Consider using a workflow management system to track progress on work and remember to include invoicing as an integral part of your job processes. Ensure the interface between operations and finance is robust so nothing falls through the cracks
- Embrace technology where possible to issue invoices with the customer present. For example an electrician or a plumber might complete a job sheet on site. Instead of returning this to the office for someone else to produce the invoice, use an iPad and appropriate accounting software to actually raise the invoice and email it to the customer before even leaving the premises
- Where repeat invoices are raised, either monthly or annually, ensure that these are programmed in to your accounting software to be raised automatically
- Where you are able to recharge certain costs that you incur on to customers, make sure that your accounting system allows you to tag those costs as rebillable. Then check that you have recharged those costs at least every month
- Review your accounts in detail, and specifically your sales figures, every month to verify them. Make keeping up-to-date and accurate financial records a key priority in your business
In brief, it is surely worth every business owner taking the time to review their business processes for any potential control weaknesses, particularly in this area. You’ve done the work, so jolly well make sure that you get paid for it!