4 min read
Welcome back to Back to Basics - a refreshing revisit of some of the core foundations of credit control. This week we're continuing with the fantastic series The 7 Habits of Highly Effective Invoices, to revisit and refresh on the basics of how to get invoices paid on time. Over the coming weeks, we’ll continue to explore a new habit from the series each week.
Last week we looked at the invoice elements imperative to getting paid. This week we dive into Habit 5: Know where you need to go.
An invoice has one purpose, and one purpose alone: to get paid on time.
At Chaser, we’re nuts about getting invoices paid on time. Welcome back to The 7 Habits of Highly Effective Invoices, our series on the most valuable things an invoice can do to get paid on time. These are taken from our Founder & CEO David Tuck’s experience working as a Finance Director and Accountant.
Habit 5: Know where you need to go
In Habit 5 we’re moving on to the stage where you’ve actually created your invoice. Now it’s about who do you send it to. Your invoice wants to get paid. In order to get paid, it needs to get into the hands of the person at your customer who can process it into their accounting system for payment. That person is a hero to your invoice that they’re dying to meet; think a member of One Direction, albeit likely with less hair gel.
There are lots of potential traps here. You can easily send your invoice to the wrong person at your customer. This can mean delays in it being processed for payment. Or even worse, it gets missed completely due to lack of internal communication at your customer. Don’t leave your invoice at the mercy of the internal company communication jungle. Because as we all know, jungle is massive. Do your homework to find out who you need to send your invoice to.
Photo by Barbara / CC BY ND
What you need to know
Knowing where your invoice needs to go is all about understanding your customer’s process for paying invoices to their suppliers. There are two requirements here that you need to know:
- What has to happen in order for your invoice to be approved for payment; and
- Who will be responsible for making that payment.
Here are a couple of examples from experience:
- When I headed the finance team for a small drinks business, we sold our product to a small wholesale customer. We dealt exclusively with the owner of the business, Greg. Greg managed the business very closely. He was responsible for making all orders, along with approving and making all payments to suppliers. We would send our invoice to Greg. He personally would check that the cases of drink that we were invoicing for had been received. Greg would then make the payment of our invoice himself on their online banking. Requirements 1 & 2 would both be Greg’s responsibility.
- When Finance Director of a social network with our advertising sales, our relationship was with the Advertising Buyer at our customer, Jane. Jane would oversee the campaigns we ran for them. She needed to approve that the campaign had been completed. It was then the finance team that made the payments. We would email our invoices to both Jane and the finance team. That way, Jane could “reply all” to the email signing off that the campaign had been completed. The finance team could then see this and make the payment. Requirement 1 (Jane) & 2 (finance team) were with different people so we made sure our invoice sending catered to this.
- When working for a marketing software business, we sold to a big media company. Our primary contact, Jeremy, worked within their marketing team. But he had no say in whether and when our invoice got paid. Both of these were with their large finance team. We had to chase Jeremy to find out what the finance team’s process was for paying invoices and who was responsible for our account. Once we found that out, we were able to make sure our invoices got to the right person.
Know where you need to go
You may only be dealing with customers where requirements 1 & 2 are the responsibility of your primary contact at each customer. In which case knowing who to send your invoices to is nice and easy. But in so many cases that’s not the case. And doing your homework to find out who will need to sign off your invoice and who will pay it is well worth the investment. Your invoice will thank you later when it helps it get paid on time!
Your invoice needs to tick a lot of boxes in order to be able to get paid on time. None of these boxes are hard to tick. But equally, they can be very easily overlooked in issuing your invoice. These oversights can really come back to bite you and your cashflow. By making sure all of the members of the invoice team are present and correct, you can help avoid the painful bite of late payment.
Thanks for reading. Stay tuned for Habit 6: Mastering the three Ps (Part 1).
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