It isn’t cheap to run a construction business. You need to make sure that you are tracking and billing for your work. No matter what billing method you decide to utilize, you want to present a professional and reputable invoice to your clients.
Luckily for you, we have tips to help you achieve seamless construction invoicing. These tips will help you send invoices that are clear and concise and will help ensure that you get paid the right amount and on time.
Are you interested in learning more? If you are, then keep on reading and we will walk you through how to invoice properly!
Set a Billing Policy
A primary organizational task for your business is to come up with billing procedures and policies. Your billing policy should include:
- late fees
- preferred payment method
- time to pay
- timing of invoicing (monthly, weekly, daily, or project end)
- billing method (electronic or paper)
- rates
When you have a set of standardized rules, you will be able to simplify your invoicing and evaluable client contracts.
However, even if you put a standard policy in place, some client contracts might differ. Also, in addition to having your own set of rules, it’s very important that you understand the billing policies of your clients.
Make sure that everyone’s policies are outlined at the start of the project so that you can present your client with an appropriate bill.
For example, one client might require a paper invoice and a longer time to pay you than your typical billing standards. By knowing this beforehand, you can negotiate better terms with the client and make appropriate adjustments.
Using a service like costcertified.com can help make sure that your payments go smoothly.
Send Timely Invoices
A common problem that contractors face is that clients don’t pay them on time. The longer you wait to send an invoice, the worse it is going to be.
Make sure that you send off your invoice as quickly as you can, while still being reasonable. When an invoice is sent late, you can rest assured knowing that the payment will also come late.
Also, late invoices tend to lead to more confusion than invoices that were sent on time. Make sure that when your client gets your invoice, the project is still fresh in their mind.
Keep Invoices Simple, but Detailed
You want to make sure that the customer understands exactly what they are paying for. You want to provide enough information to support the payments that you are requesting. However, you don’t want to include so much information that your client can’t make heads or tails of the invoice.
An easy way to fix this is with standardization. When you have a uniform method and a basic format in place for labeling work, you’ll be able to help everyone.
You will keep the company organized while also providing clear information to the customer.
You should also always include a reference to the estimate or quote. You don’t want there to be any problems when it comes to comparing the initial estimate with the final invoice.
Your client will appreciate the transparency.
Document Everything
It is very important that you make sure that you keep an organized record of everything that is related to each invoice. Keep all of the timesheets and receipts from the job.
In the construction industry, documentation is vital. Contractors get paid for the work they document, not necessarily the work that they perform.
If a dispute comes up, you will want to have the documents that prove payment terms and prices.
Short Payment Terms
Usually, invoices provide for one month of credit. However, some bigger companies even go as high as four months.
Why is this? Because a construction company is not a bank. Longer payment terms can lead to higher debt ratios. This can absolutely ruin a company’s finances.
Don’t be afraid to ask for favorable payment terms. And don’t allow your company to get pushed into terms that are too burdensome.
Building a collaborative relationship with a client is going to help put you on the path to getting better terms.
Early Pay Incentives or Late Pay Penalties
One easy way to speed up the payment process is to offer discounts if the payment is made before the day that it is due. On the flip side, you can also choose to invoke penalties for late payments.
Not all construction companies use these kinds of strategies. But they can be effective at incentivizing your clients to pay you in a timely manner.
It is important to remember that incentives can cut into your bottom line. It shouldn’t take a discount incentive for you to get the pay that you deserve. You should more so see it as a way to reward your customers.
Late payment penalties can be effective but they can also frustrate your clients.
The Importance of Using These Tips for Seamless Construction Invoicing
Hopefully, after reading the above article, you now have a better idea of how you can deliver seamless construction invoicing to your clients. As we can see, the more organized and standardized your practices are, the easier time you will have with billing and payments in the future.
Are you looking for other helpful and interesting articles like this one? If you are, then you should make sure to check out the rest of our blog today for even more!