All small business owners know that in order to earn money, they have to do something for a client. But some seem to overlook that in order to get the money that they earned, they have to bill the client for it. Sounds simple, doesn’t it. But I have found over the years that many small businesses forget to bill clients for some part, or even all, of the work that they did for them. This is usually attributable to poor accounting organization and billing habits. Read on for five tips to improve your company’s billing habits to be sure that you are collecting all of the revenue that you have earned.
KEEP GOOD TIME RECORDS
The price of any job is ultimately dependent upon how much time it takes to complete; even if you’re billing on a lump sum or fixed fee basis. So knowing how long it takes to perform a task is very important.
Develop a system to keep track of the time everyone spends on a project or task. You can use simple preprinted time sheets or a computer spreadsheet like Microsoft Excel. There are good online products like Tsheets, Replicon and Workday. And many of today’s accounting software products like QuickBooks have built-in time tracking modules.
It’s important to have a routine that is followed consistently so that all time is recorded. Train yourself and your employees to record time every day instead of waiting until the end of the week.
TRACK ALL MATERIAL USED
Track the material that you use on your jobs by always providing a job or customer name when purchasing from your suppliers. If you run to the store, make sure to write the customer or job name on the receipt. As often as possible, purchase items for jobs separately. If you use the same supplier for multiple customers or jobs, make sure the company is generating a separate invoice for each, not lumping all items into one invoice for you to sort out later. If you go to a local store to purchase items, have the cashier ring up each sale separately or at the least, group the items by customer as they are rung up. This will save you time and effort later when you are entering the receipt information into your accounting system.
And don’t forget about the small stuff you use on a job. Account for miscellaneous or shop supplies you use like nails, ink, paper, etc., by allocating an amount for overhead based on recent or average purchases of those items.
MAINTAIN A GOOD FILING SYSTEM
Don’t just throw receipts and invoices onto your dashboard or into your wallet or purse after leaving the store. Have a specific folder, envelope or clipboard that you carry with you to hold these items until you get back to your office. In your office, set up an “in-box” where you put these and other documents that come in but you haven’t processed and filed yet. If you toss papers haphazardly onto your desk, you’re more apt to misplace, overlook or just plain loose them.
Or, consider getting some folders and labeling them with the customer or job name for all open jobs. Keep them in a file rack or something similar in a conspicuous place on your desk or in a file bin mounted to a wall; don’t hide them in a drawer. Place receipts and invoices into the appropriate folder if you’re not able to immediately enter the data into your accounting system. Receipts and invoices can be kept in the folder until the job has been finished and billed or, if you trust your system, you can move each item to the appropriate accounts payable folder or paid bills file after the information has been entered into your accounting system.
Another method might be to make a copy of each bill or receipt and then put the copy into each job folder and the original into the appropriate AP or paid bill file. When you’re ready to prepare the final invoice for a job, review all items in your folder to make sure that you haven’t missed something that should be billed. Regardless of which method you choose, be consistent on how you approach it.
ENTER ALLL DOCUMENTS INTO YOUR ACCOUNTIG SYSTEM
This is especially important when you’re billing on a time and material basis. These days, most small businesses use some type of accounting software to handle their bookkeeping. Become proficient in the use of the software and be sure to mark items as billable to a customer. This will lessen the possibility that you will forget to include something in the invoicing.
Mark each invoice and receipt with an X or a check mark in the upper right corner after you’ve entered it into your accounting system. Or you could purchase a pre-inked stamp that prints “Posted” or “Entered” on the document.
If you’re not billing on a time and material basis, you can still use your accounting software or a secondary method like an Excel spreadsheet to track the cost of materials you used in a job. This is a good idea to do so that after the job is finished, you can review your costs to see how well you estimated the job.
GENERATE AND SEND INVOICES ON A REGULAR BASIS
Lastly, be sure that you are actually generating invoices for your customers. All of the other work that you have done thus far won’t make you rich if you’re not sending bills to your clients. Generating invoices on a regular basis is the key step to collecting the money that you have earned.
Depending on the nature of your business, you may be generating invoices just once a week. If this is the case, set a specific day and time of the week that you will gather all of your documentation, sit down and create invoices. Maybe Wednesday from 4 to 5 o’clock would be a good time for you. Perhaps it would be Saturday, after the workweek is over. Your business may be such that you only need to generate invoices once a month. Or, you may have the type of business that requires producing invoices on a daily basis.
Regardless, write your invoicing day on your calendar and then stick to it. Try to identify a day and time when you can devote yourself to this task without being interrupted. The same thing goes if you have a bookkeeper or secretary to help you. Develop a procedure whereby billing is done on a regular basis. Use check lists and review your job folders.
Getting paid starts with sending a bill. Improve your billing habits and you will improve your cash flow.