Sometimes, making sure all invoices have been paid on time and keeping tabs on your business’s general financial health can take a back seat. It might seem that as long as there’s money in the bank, all must be well. However, a business bank balance doesn’t tell the whole story; there are other factors to take into account.

With this in mind, here are 3 things you can do to keep on top of cash flow and ensure invoices are paid on time.

1. Understand business financial statements

First, you don’t need to be a professional accountant or bookkeeper to be able to read your business’s financial statements. In addition to receiving professional advice from such experts, a cursory understanding of what each statement covers will help you better assess your business’s financial position and identify areas for improvement.

The Balance Sheet provides a picture of the strength of your business, its assets, liabilities and equity – it’s often the document potential investors and other interested parties will look at first. The Profit and Loss Statement will tell you if your business made a profit or lost money over a set period. The Cash Flow Statement, on the other hand, shows the actual cash coming in and going out of your business.

Understanding your business’s financial statements helps you spot trends. For example, you’ll be able to identify whether your costs and overheads are increasing or if you need to raise prices. Just because you are bringing in money or selling lots of product, doesn’t necessarily mean you are making a profit, because your expenses could be eating into that profit. On the other hand, your business could be making a profit on paper, but you haven’t actually got cash on hand at the bank to pay vendors.

Understanding your financial statements and what they are telling you removes the guesswork so you can take action where needed.

2. Review regularly

It makes sense to review your business financials regularly to keep on top of things and ensure your business is on track. By doing this, you’ll be able to spot potential problems such as invoices not being paid on time, you can make decisions early, avoid ‘surprises’ and, where necessary, adjust your sail (or sales!). Monthly reports help you plan for the short term and prepare for the long term, and avoid preventable problems such as not having enough cash on hand to pay suppliers because you are waiting on a receivable, such as an unpaid invoice that’s been forgotten about

With Invoice Ninja, a leading FREE invoicing software, in addition to its many small business and freelancer-friendly features, you can generate and email reports on a regular schedule.

For example, at the end of the month, you may want to send yourself a sales report or an aged receivables report. While it’s easy to generate a report manually, you can configure the system to email you reports on a regular schedule. Watch our short video here to take you through the setup. Try Invoice Ninja for free here.

There’s nothing to stop you reviewing your financial position more frequently, either, such as weekly or daily. 

3. Follow up

Invoices can be paid late for various reasons, but there are things you can do to mitigate late payment and improve cash flow. Reminding the payee before payment is due and getting confirmation from them that the invoice will be paid on time is one of them.

Depending on the client, picking up the phone and making a call just to confirm payment will be made when due can be effective and a good way to build rapport. However, this could be time-consuming if you have several clients or lots of customers.

With Invoice Ninja, you can receive notifications when a client views and/or pays their invoice or if a client payment fails, keeping you in the loop in real time.

Furthermore, the Invoice Ninja Pro Plan allows you to create custom email reminders based on the invoice date or invoice due date. You can define date parameters to remind your clients before or after invoices are due to ensure you get paid. Set ‘First, Second, Third’ or ‘Endless’ reminders to ensure invoices are not overlooked and you get paid faster.

Knowing you have a reminder system in place to prevent late payment will provide you with peace of mind and help improve cash flow.

1. Standard Invoice

A standard invoice is a common yet important business transaction document and is most likely the main type of invoice you issue to customers and clients.

An invoice is essentially a document requesting payment for goods or services sold. It includes important information such as the invoice date, due date, and details of both the buyer and seller. It covers the transaction and includes line items such as goods or services sold, description, quantity, cost, any taxes due, and the total. It will have a unique number and include payment instructions.

Naturally, when issuing an invoice, you want to ensure that you don’t miss any important information, and this is where invoice templates come into their own.

Invoice Ninja, a leading free invoicing software, provides free access to a range of professionally designed invoice templates that you can customize with your logo and brand colors. By using professional invoice templates, you mitigate the risk of missing important information, which could result in delayed payment.

2. Proforma Invoice

A proforma invoice is a non-binding quote/estimate of the cost of services, goods, or products. It’s a useful document issued by the seller to the buyer, as it can help the buyer budget in advance or decide whether to proceed, negotiate, or obtain approval for the sale. It’s also handy for the seller, as it helps them plan ahead. 

A proforma invoice, like a standard invoice, typically itemizes costs and includes payment terms, details about the product or service to be delivered, along with the relevant dates.

3. Purchase Order

A purchase order is not, strictly speaking, an invoice, but rather a request for services, goods or materials and is typically used by businesses in the procurement process. The buyer issues this to the seller, and it includes details such as the type, quantity, and cost of the products or services being requested, as well as any relevant delivery or payment terms.

You can create purchase orders in Invoice Ninja to email out to your vendors. When they are approved, they are then converted into expenses. These expenses can be rebilled to clients or used to run reports.

4. Credit Invoice

A credit invoice, also known as a credit note or memo, can be issued to adjust an invoice that has already been issued, where the amount payable is to be reduced, for example, due to a refund, cancellation, miscalculation or error in the original invoice. 

It is used when credit is due to the client or customer and can therefore be used for discounts. It’s a record of the money owed to customers or clients.

5. Debit Invoice

A debit invoice, also known as a debit note or memo, is the opposite of a credit invoice and can be issued when the original invoice amount needs to be increased or additional charges require collection. 

It could be that the work cost more than estimated, or more hours were worked. It is used when you need to charge the client or customer more. It acts as a record of the money owed to the supplier.

6. Recurring Invoice

A recurring invoice is one that is issued regularly for the same amount. It is frequently used by freelancers who have retainer clients for services where the monthly amount doesn’t change. It can also be used for subscriptions, rentals, and service packages, to name just a few examples.

If you have clients who need to be billed repeatedly on a fixed schedule (e.g., weekly or monthly), Invoice Ninja offers auto-billing via the world’s most popular payment gateways. See them all here. Auto-billing is a feature that enables the payments system to capture your clients’ credit card details and store them for billing at a future date. This means you can save time by automatically billing long-term clients with recurring invoices.

7. Interim Invoice

An interim invoice is one that you issue before the end of the project or before the final invoice is issued. It can help with cash flow because it allows you to apply milestone invoicing, where you are paid at intervals throughout the project. An interim invoice can also be used as a deposit invoice to collect a deposit before commencing work.

With Invoice Ninja, you can set up partial payments/deposit requests, and the invoice will update itself automatically. After your client pays the partial payment, the invoice will automatically update itself with the balance due and set the new final invoice due date. Perfect for milestone invoicing and/or deposit collection.

8. Timesheet Invoice

A timesheet invoice is used when you are billing for time spent on a project and is typically used by freelancers who charge by the hour. It details the hours spent and calculates the amount due based on the actual hours worked.

Invoice Ninja’s time tracking feature allows you to accurately record every second spent on each individual task and quickly transfer timed data to the relevant invoice. When you’re done with a task or series of tasks within a project, simply click and send your work time to an invoice with 1-click!

We also have a Google Chrome task extension, so you can conveniently manage all your tasks within Chrome

9. Past Due Invoice

A past due invoice, as the name suggests, is issued when the payment date has expired and the payment has not been made. It can also include any late payment fees. 

With Invoice Ninja Pro Plan, you can create custom email reminders based on the invoice date or invoice due date. You can define date parameters to remind your clients before or after invoices are due to ensure you get paid. You can also charge a client an additional fee for unpaid invoices with our automatic late payment fee feature.

10. E-invoices

E-invoices require no manual intervention and have a structured format. The buyers and sellers’ accounting systems can ‘machine read’ each other’s invoices and receipts, therefore speeding up processing time. 

Many countries in the EU are now mandating the requirement to issue e-invoices. Invoice Ninja is among the first to support the direct delivery of e-invoices over the PEPPOL network, the EU standard for exchanging electronic documents. You can read more about e-invoicing here.

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Invoice Ninja offers an incredible range of small business and freelancer-friendly features to help you get paid hassle-free and fast. You can try Invoice Ninja for free at the link here.

Here are 3 simple but astute things you can do to help create a robust collections process, improve freelancer-client relationships, and get your invoices paid on time.

1. Set out clear payment terms and conditions in writing

It’s important that you set out clear payment terms and conditions in writing from the outset so both parties are fully aware of your fees and payment terms, i.e. when you will invoice, how much you will invoice, when the payment is due, and how to pay you. 

It might be that you ask for a deposit upfront and so only commence the work once the deposit is paid, or you may offer milestone invoicing for longer projects (where you are paid at specific points throughout the duration of the project), or you may invoice monthly or immediately at the end of the project. 

However you charge, terms must be explicit upfront; for example, you may charge a late payment fee or apply a discount for early payment to encourage prompt payment. You need to be clear about any late payment fees and be willing to enforce them. 

Your acceptable payment methods are another important element of your payment terms and conditions. It’s worth noting that some payment methods might not be available to your clients or are inconvenient, especially if you have overseas clientele. Making it easy for clients to pay you by accepting various payment methods means your invoices will most likely be paid more promptly.

Invoice Ninja offers multiple payment gateways. A payment gateway is the tech that allows your clients to pay you securely and swiftly online. Multiple payment gateways give your clients more choice in how they pay your invoice. Our payment gateways include Stripe, PayPal, GoCardless, and more. Plus, our BTCPay Server integration means you can now receive Bitcoin payments directly to your wallet with no fees.

Integrating your Invoice Ninja account with a payment gateway allows clients to pay their invoices with 1-click! The payment gateway processes the transaction in the background, so your client never has to leave their Invoice Ninja client-side portal. A portal also means that clients can easily view their invoice history and pay any outstanding invoices instantly.

See all our payment gateways here.

Try Invoice Ninja for free here.

2. Send at the right time, in the right format, and to the right person!

It’s paramount that you send your invoice on time and to the right person, especially if you are working for a large organization with many departments and processes that your invoice needs to go through to get it signed off and settled. 

Not addressing it to the right person could mean the payment is delayed. It’s often the case that the person you are dealing with on a project isn’t the person responsible for making payment. Furthermore, if you don’t send your invoice on time, it can also mean your payment will be delayed. This could be because the client only processes invoices on a particular date, expects to receive an invoice from you but doesn’t, or simply that you sent it after it was due! If you are working with a public institution in Europe, for example, there may even be other protocols you need to follow, such as adopting the European standard of e-invoicing (PEPPOL).

In any event, you’ll want your invoice to look professional and include accurate data and other necessary details such as invoice number, due date and payment instructions, as well as accurate line items and work completed, to name just a few.

As well as a host of payment and automation options, Invoice Ninja includes attractive, professional invoice template designs you can customize with your logo and brand colors, making the whole experience of paying you branded, professional and seamless.

You can find out more about how to boost your brand at our post here.

3. Follow up

If, for whatever reason, you haven’t received payment of your invoice by its due date, then a short, friendly email reminder to your client to prompt them to make payment can go a long way. Alternatively, give your client a quick call. If you’ve nurtured a positive client relationship, this can also help to encourage prompt payment of your invoices.

A more efficient and less time-consuming process is to use automated reminders and follow-ups. With the Invoice Ninja Pro Plan, you can create custom email reminders based on the invoice date or invoice due date. You can set them up so they are sent automatically at the frequency and timing of your choice. You can set “First, Second, Third” or “Endless” reminders to ensure invoices are not overlooked and you get paid faster!

Following up on unpaid invoices (accounts receivable) is an important bookkeeping task that, if not done promptly, can hinder cash flow, so it makes sense to establish a clear strategy and process for payment collection for your freelance business.

Once set up and implemented, a robust collection process should ensure your invoices are always paid on time.