It’s time to get paid and enjoy the rewards of hard work! So you’ve sent your customers their monthly invoices. Soon enough, you’ll be collecting your hard-earned money through ACH payments, paper checks, e-Checks, wire transfers, and more. You’ll be able to bolster your monthly cash flow and keep your company growing even more.
But here’s the thing – how do you track which customers have paid and which ones haven’t? It may seem like a problem that you can solve easily. You reconcile each payment with each customer and invoice number. However, this only works if you have a headful of invoices each month. However, if you’re replicating this method over hundreds of invoices in each cycle, it can prove to be a challenging and time-consuming task. Many businesses done have an unlimited workforce or hours to dedicate this effort. So how can businesses like yours keep track of customer payments? While it can be a daunting task, the good news is that you have multiple options! ReliaBills is here to break the entire process down to prove how bookkeeping and invoicing can give you back your most valuable resource, which is time.
Why is Tracking Customer Payment Difficult?
If you’re using the traditional way of keeping track of your payments, you’ll soon realize that this method is hard and complicated. First, you mail the invoice and wait for the customer to receive it. Once the customer receives your physical invoice, they will review it and cut a check, all of which can take weeks or even longer. Once they’ve verified everything, they mail the invoice back to you. If they don’t note what invoice the check applies to, you must go through customer information to associate the right payment. You will need the right account and invoice number. You must then manually note in your accounting software that payments were applied. You will then proceed to make a bank run, deposit the check, and wait for it to clear.
This long-winding process can take weeks or even months to complete. What’s worse is that it can potentially bleed in over into other payment cycles, making it extremely difficult to determine how much has been paid and what’s due.
The same complications can extend to electronic payments. If you aren’t using an accounts receivable solution, you may receive payments through the company’s bank or payment portals. Then, you’ll need to make sure that the payment is applied to the proper invoice and noted in your accounting software.
How to Keep Track of Your Payments and Invoices?
Keeping track of all your invoices and payments can be difficult, but it’s still a crucial part of the success of your small business. All of the amounts paid affect the cash flow the company has on hand to pay its expenses. That’s why you should use a professional accounting software program for tracking invoices and payments. A good program will be accessible from the cloud and come with a dashboard that shows a company’s total amount of paid and unpaid expenses, profit, and invoices. That way, you can keep track of all the credit that comes into your company.
Here are five useful steps to help you keep track of your invoices and payments:
1. Research an Accounting Software and Choose One That Fits your Small Business
A good accounting software system should be a solution for your small business accounting needs. All of its features should reflect that. Before you create an accounting software account, ask yourself these questions first:
- Is it Cloud-Based?
Don’t choose a program that needs to be downloaded to your desktop. The reason is that it will be limited in terms of access as you can only use it when you’re at your computer. You want the convenience of cloud access. That way, you can use the software no matter where you are, and on any device you want. All you need to know is the website and your account logins.
- Does the Software Allow Multiple Accounts?
If you’re running your own small business, consider letting all members of your staff enter their own expenses. That way, it will save time for the staff member who is delegated to this task. Make sure the software allows for multiple users and that it can restrict access to certain features. Of course, you don’t want to share the actual financials of your business with everybody who has a login, right?
- What Does the Software Offer?
It would be great is the software allows you to generate invoices and check off payments, but what else can it do? Will it allow you to categorize your expenses? Can you take all the information you’ve entered and done something instantly with it, like generate a profit and loss report? What are the other extras? For instance, does the software allow you to do up an estimate? Will it accept credit card payments from clients? Does it accept the type of credit card payment that you offer? Or will it automatically generate recurring invoices? Always consider all of the features and see if the software matches your company’s needs?
- How Can It Secure My Personal Data?
Your company’s financial information cannot be trusted by just anyone. That’s why you need to know what kinds of encryption and firewalls does the software employ. That way, you can determine if the security system of the software is enough for you to trust its capabilities of keeping your credit and financial information locked and secured.
- What are the Software Pricing Tiers?
Maybe the monthly fees seem too much of expenditure for your small business. While a common choice, there are times when the monthly plan just isn’t worth it. However, consider that most good accounting software programs come with pricing tiers. If you have a small client base with minimal accounting needs, you’ll be better off with the basic plan. Whereas if your company has a sophisticated accounting system with a large client base, then the medium to premium plan would be fit for you.
- Is It Cost-Effective?
Notice that we didn’t ask if it’s cheap or not. A cheaper price isn’t always the best solution. Consider how long it takes for you to keep track of transactions and creating invoices manually. Weigh the value against all features that the software offers, along with the monthly price. Through this calculation, decide if whether or not it’s worth it.
- Always Check the Reviews
In every software that you consider, always consider the customer reviews. It’s a direct feedback from everyone who has tried the software. Always consider external reviews and not the ones posted on the website as they tend to be fabricated and not genuine.
2. Follow these Best Practices when Invoicing
Most accounting software programs will provide useful templates for you to generate invoices. It’s particularly handy since the program will always create a new invoice number for your account and will also remind you of any upcoming payments. However, while this simplifies the entire process, you must ensure that you enter accurate and detailed information in all of your invoices. On the surface, it may not seem like a big deal when creating the invoice. However, if an invoice goes unpaid, these details could suddenly be very important. When filling out the fields of an invoice, it’s recommended that you do the following best practices of invoicing:
- Make sure the description is specific and detailed as possible.
- Double Check the Due dates if they are correct.
- The total amount of money should be accurate.
- Check if your contact details are complete and accurate.
Related: FreshBooks: Tips when Invoicing
3. Do a Follow Up on Invoices the Software Marked as “Late”
Your accounting software will notify you whenever money is coming into your account. It also notifies if payments are late. Some systems will even generate and send reminder emails to clients. However; if your accounting software does not have this feature or if the emails are ignored, you’ll need to be the one to make the follow-up.
The best practice is a courtesy phone call to the client to ask about the payment. If the contact can’t be reached, a follow-up email with the original invoice attached will often do the trick. The client will appreciate the fact that you had the initiative of reminding them and providing them with the correct details via the invoice that you attached.
4. Run Reports Frequently
Now that you have the software maximize its benefits by running regular reports, including a “Profit and Loss Report.” This type of report is of good use as it totals up all the invoices to date (paid or unpaid) and then deducts your expenses to give you a net profit total. That way, you are always aware of any fluctuations on the flow of money that come into your company. You’ll also know the date on which money comes into your company’s bank account.
5. Use The Software of your Choice to Determine Your Future Financial Plan
Once you’ve been using the software for a while, you’re going to start noticing patterns while you keep track of your invoices and payments. There will be expenses that may seem unusually high or invoices that are always paid late by the same customer. There might also be times when some customers don’t make the same payments. Take notice and make notes of these subtle yet very significant patterns. From your notes, you can then create a new financial strategy for the future. Decide if there are ways you can cut expenses by doing things differently, or if you should change the payment terms for customers who are always paying late.
By following these five useful tips and using ReliaBills invoicing system, you will always be paid fast. For more information about ReliaBills, visit our website now at www.reliabills.com. You can also contact our hotline at 1.877.93BILLS or send us an email at firstname.lastname@example.org.