Tweet

Business-like Billing

Written by: James Chan

Article Overview: Learning how to bill professionally is just as important as knowing how much to bill.

Business-like Billing

Nearly all entrepreneurs sometimes worry about how much to bill. Many don~{!/~}t think enough about how to bill. They are careless about payment arrangements in their work agreements. They are slow to bill. And they send invoices that aren~{!/~}t sufficiently specific about the terms of payment.

This sort of conduct is understandable. People are often shy about asking for payment, particularly if they don~{!/~}t know whether the customer is satisfied with what they have provided. But it can also be self-destructive. Most companies don~{!/~}t pay bills any faster than they need to. Your billing must be timely and clear, or else you will spend your life in a cashflow squeeze.

The best opportunity to deal with payment issues is at the very beginning of your relationship with the client. Practices vary from business to business, but as a general rule, you should not begin work or provide products without a purchase order, an agreement signed by an authorized representative of your customer, or some other form of legally binding contract.

Everyone understands that such a letter must specify how much you will be paid, but many people become careless about specifying when it will be paid. This is a matter for negotiation that ought to be handled up front.

If you go ahead with just a verbal understanding or a handshake, you will often find that a contract must still be executed once you have finished, and that this can be time consuming.

One of my friends agreed, on a verbal basis, to do a small but very urgent job for an arm of Microsoft. A week or so after he was done, he sent an invoice. Several weeks later, he received not a check, but a thick packet from Microsoft. A letter explained that his invoice could not be processed because he was not a registered vendor, and most of the rest of the packet consisted of forms to be filled out to attain that status. There was also a sheet specifying a precise format for all invoices.

The forms, which were designed for large companies not one-person operations, were forbidding but not onerous. They did, however, require him to give Microsoft sixty days to pay, following the receipt of an appropriate invoice from a registered vendor. Nearly two months had already gone by. He realized that Microsoft would be paying him about four months after the rush assignment, and would still be, by its own definition, on time. If he had addressed this issue at the beginning, he could probably have received payment at least two months sooner.

When I agree to do a project, I almost always ask for some of the money to be paid before I will begin the project. This requirement, which few clients have ever argued with, assures me of the seriousness of the client. It also gets you some money at the point when the client feels most urgently about the project. Once you have solved the problem, it comes to seem less urgent to the client, who may take his time paying you.

A good invoice has the word ~{!0~}INVOICE~{!1~} in large, bold letters. Workers in the accounts payable department do not deal in nuance. You must make it clear that this is an official demand to be paid. Obviously, it should also include the date very prominently. The invoice is what sets the payment clock ticking.
When I send an invoice, I make reference to the contract or purchase order. If it is a purchase order, it has a unique number to which you must refer on your bill. You may also have a vendor number that you should include.

You shouldn~{!/~}t be wordy about the products or services delivered; such matters are specified in the contract or purchase order. But you should say something brief and clear, so that those processing your bill will have something to refer to if there is a problem. Expenses that have been authorized should be clearly marked and listed separately. (And don~{!/~}t forget to include taxes and surcharges you have paid.)
Most importantly, the invoice should say how much is due you, and when. If you want immediate payment, you should say ~{!0~}Payment on receipt of invoice.~{!1~} Otherwise you should state your terms, such as ~{!0~}Net seven days,~{!1~} or ~{!0~}Net 30 days.~{!1~} You may find it advantageous to offer a discount for immediate payment. If so, state it clearly on your invoice.

Always make sure that your invoice is clear and businesslike. It~{!/~}s a minor detail, perhaps, but your livelihood depends on it.

Related Articles
  Frequently Asked Questions-Funding Medical Billing Companies
  Why You Still Need Attorney Billing Software If You Use A Flat-Fee Structure
  Medical Billing Companies Can Increase Their Cash Flow through Factoring
  Tips For Using Attorney Billing Software To Improve Law Firm Collection Rates
  How Medical Billing Companies Can Avoid the Double Credit Crunch

Article Tags: binding contract, handshake, invoices, microsoft, negotiation, pay bills, precise format, relationship, squeeze, t pay, urgent job, work agreements



Related Forum Posts
Seek Venture Capital & Funding - Hello, Greetings from India. I am Seeking Venture Capital for Offshore Software Company Start-up. Need advise along with Business Model Sample. I have a basic outline for an offshore company. 1. Technology - like Microsoft Dot Net, Java, LAMP 2. Talent Team - Found Good Technology Developers. 3. Where I can get the leads/potential customers - Leads have been identified who are willing to move forward offshore projects. 4. I do not have resources like funding. It is a very critical factor to me Industries: Manufacturing, Real Estate, Retail, Insurance, Distribution & Logistics, Healthcare, Industry Associations and Software Product Development, Agricultural Industries and Etc. Services: Offshore Software Development Company. Offices to be located: Hyderabad, Andhra Pradesh, India and USA. Products/Services/Applications in areas like POS & Billing, Sales & Distribution, Production Planning, Material Management, Inventory Control, Plant Maintenance, Purchasing, Accounting and Logistics. Dynamic Web Programming with Database Driven Content Management Systems, Online Stores for E-Commerce, B2B Solutions, Community Portals, Website Redesign and Development, Custom ERP with Enterprise Wide Functional Modules such as Marketing, CRM, Accounting, Inventory Control, Sales & Distribution, Production Planning, Purchase & Stores, Logistics and Supply Chain. Seek your further questions and help. Thank you, Best Regards, Jayapratap.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

10 Steps to a Great Support Team

3 Health Insurance Misconceptions

Providing Feedback

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.