How to clean up invoicing and accounts receivable practices to improve your cash flow


When business owners wonder how they can be working so hard and never seem to have any extra money, it usually boils down to the cash flow. Cash flow is the lifeblood of all companies, and accounts receivable (A/R) is the number one contributor to its health. Nine times out of ten, that’s where all the money is! Sometimes it’s the biggest asset on a balance sheet.

Taking simple steps to clean up your invoicing and accounts receivable practices can have an immense effect on your company’s cash flow. Here are some tips to get organized:

  • Make sure your invoice is clear and simple so that there are no questions about what your clients or customers are paying for.

  • The invoice details should tie to the details of the original terms of agreement or scope of work.

  • Invoices should arrive a minimum of 20 days before payment date. Most well run businesses only cut checks once a week and this allows your bill to cover two check-processing periods.

  • Process invoices promptly and regularly. Customers are less likely to question an invoice when the billing system is succinct and timely.

  • Take the emotion out of the process. Delegate the responsibility of sending and collecting invoices to someone outside of the project, such as a bookkeeper or assistant who will then be responsible for following up on any late payments. Service providers often wait to send an invoice because everything is not perfect. It’s better to get it out the same time each month and have an automatic follow-up procedure in place for any overdue invoices.