New Business Processes – How to Bill Customers
When you start out in business, there are lots of processes to master, large and small. One of the most important is figuring out what to charge customers, but then is quickly followed by how to bill customers. Here are some simple tips to help you set up a routine or a process about when and how to bill customers, and also how to keep track of the invoices that you send out.
Create a framework
It’s easy to try and be too obliging to your new customers when you are first starting out in business in order to impress your customers or clients. However, this can often lead to chaos and poorly thought out practices. Instead, it is important to create a framework around payments from the word go – when you invoice someone, how long you leave it before you chase them up for an outstanding payment, and what to do about those people who take liberties and either drag their feet about paying or ignore you entirely.
In fact, starting out on your business with a lack of a structured payment framework in place can lead to tricky cash-flow problems that could stall your growth and business processes and be very damaging for your business.
If you don’t know when an invoice will be paid, you might find that you don’t have the available cash spare to pay a bill or buy in supplies needed for a new product. Cash flow problems can hamper the long-term success of the business and means you cannot handle any sudden, unexpected expenses or costly, yet essential equipment repairs or replacements.
Easy to Manage Payment Structure
The payment terms you set up should be simple and straightforward to implement from your end and be understandable and easy to comply with from your customer’s end. You might want to set up a system where you collect a deposit up front to secure a job or project. By doing this you will have some source of income straight away. You then set up a time frame for when the rest of the payment is due, whether it is based on a specific delivery date, or a certain number of days after the product or service has been delivered, for example payment is expected 30 days following delivery.
There are no set rules about the exact payment terms you apply, but you do need to apply them to all of your customers across the board. To do otherwise would be quite chaotic. You also need to ensure you follow your framework in creating and sending invoices as well as delivering products or services in the defined timescales.
If you miss your own set deadlines then you can hardly expect your customers to keep to theirs. Also, missed deadlines or poor policies can reflect really badly on you and your reputation as a professional.
Be taken seriously in business
As a new business just starting to build a strong foundation, you also need to be taken seriously as a professional business not only by your clients or customers, but also by your suppliers and peer companies. Registering your business as a Limited Company will certainly help to raise your business profile and establish you as a serious and professional business. It makes your invoicing processes carry more weight and will encourage your clients or customers to prioritise your payment requests above those coming from an unregistered company or solo entrepreneur or sole trader. Your invoices, website and letterheads will carry your limited company status and show not only your customers, but also your suppliers, that you are to be taken seriously.
You can read more about forming a limited company in our blog post: Advantages and disadvantages of limited company formation
What goes into your billing
Another factor you need to define and establish at the outset is exactly what will you charge for. Every invoice doesn’t need to be identical unless every services or product is identical – you can change elements depending on what is in the package. You may even want to incorporate discounts or special deals, such as bulk buying discounts or loyalty bonus points that can be saved up and redeemed for free goods or services.
What about your extras?
Then there are extras things that might need to be billed for. Travelling costs are one example if it is a part of the service you are offering and this may need to be included based on actual mileage done. You will need to set up a way to monitor and record this too. If you offer delivery, you may have a free delivery radius area, but deliveries outside of this area would incur extra charges. You would need to work these little extras out to make sure you are covering your costs and not making a loss.
Part of what you bill for should also include setting limits. This might be a specific number of revisions or alterations, a certain period of time to return a product should the customer not be happy, or other terms such as a returns policy where postage and packaging for returned items are either refunded in part or fully, are covered by free collections, or pre-paid postage labels. Have all of these extra costs laid out up front on your website within your terms and conditions so customers are aware of any extras costs they may be liable for. You know what you need to include and what will work for your business.
Getting the right help
This might all seem like a lot to organise all by yourself, but you can get help if you need it. Business creation services and government schemes can help you set up your business in the right format and can also help you establish those crucial processes such as billing to ensure you start well. You can also speak to us about the best way to form your own company and find out which structure would best suit your needs.