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Question for the small businesses out there regarding invoice payments

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I'm currently conducting some market research for a new project I'm working on. I don't want to be accused of spamming / selling so I won't mention the product name or website name.

 

The product is a web based service that will automatically chase up overdue invoice payments. If you use an online accounting package such as Xero, Freshbooks and others, it will automatically "poll" these services, add debtors into a "workflow" and then send email, SMS or letters (on your letter headed paper) attempting to chase payment. Debtors are also given a payment page (hosted by me) where they can securely pay their overdue payments (either part payment or the entire debt).

 

The idea is that after initial setup of your workflows (a workflow is a sequence of actions, so email after 2 days, SMS after a further 2 days followed by a letter for example) the process is automated.

 

I have a couple of questions that would really help me out if you could answer:

 

1) How many invoices do you issue per month?

2) Do you use an accounting/invoicing system online? If so, which one?

3) How do you currently deal with overdue invoices?

4) Does the system above sound like it would be of interest?

5) What would be the most appealing way to pay for this system?

a) A flat monthly fee based on the number of debtors (price brackets)

b) A small percentage of each fee being chased

c) A small percentage of the fee recovered, plus costs associated with email, SMS and letter sending

d) A higher percentage of the fee recovered, without the additional costs (essentially no win no fee, as much as it cringes me to say)

 

Thanks for reading this, and taking the time to help me out!

 

PS - My location says Australia, but the company is a Sheffield one!

Edited by Paul2412

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I get alot of organisations asking me to invoice them for products and services but I have to tell them that there is an additional charge for invoicing because of the admin involved in chasing and consolidating.

 

Many banks are now going all electronic so cheques payments are being completely phased out or pay a hefty fee to use them. Online payment providers like Paypal to start with and then merchant payment services from Worldpay etc are easy and fast to set up and work with.

 

Most of my work is paid for up front and I don't believe I am losing any custom because of that. I had some canvas signs printed last month and I had an invoice email from tradeshift.com if you want to look at how they do it.

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Payment direct to your bank account is even easier and doesn't incur any fees, unlike paypal and similar services.

 

If you don't invoice, how do you record the sale and the income?

 

---------- Post added 07-08-2014 at 09:39 ----------

 

To answer the OP, I don't use any software to generate/track my invoices, but depending on who I'm working for it's often self invoicing, and if not I only raise one invoice a month.

I've only ever had to chase one late invoice in about six years, touch wood. (And it was paid within 2 days of my polite reminder email).

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Sports Trophy - it is most unprofessional not to raise an invoice. I wouldn't buy from anyone that wanted to charge for an invoice. You could print out a blank invoice and fill it in by had, it takes seconds. Surely you still need to enter all this in some sort of spreadsheet if not accounting software? If not, how do you do your accounts, work out profits, do your tax return?

 

To the OP - In my experience, customers that pay late would ignore an email. These people need you on the phone to obtain payment. I am happy to say that most of my customers pay on time. Those that don't get a surcharge so that usually makes them think twice about delaying payment. Threatening to file a CCJ usually gets payment. I have only ever once had to file a CCJ and only once used a debt recovery company. I realised the company was closing and wanted my money before the possibility of going into liquidation.

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Chez 2

 

I absolutely agree 100% with your post.

 

Sports Trophy - you are legally obliged to provide your clients with an invoice...build it into your cost of sale, but please make sure you do. The HMRC could see this as tax evasion which is a criminal offence (different to tax avoidance)!

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I do invoice obviously, but no payment on invoice with 30 day terms etc it is all part of the ecommerce setup so no separate system is necesary.

 

Freshbooks and Hiveage look good if you havent already invested in an invoice system

Edited by SportsTrophy
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Perhaps he/she is confusing invoicing with a credit account?

 

I have accepted hand written invoices on headed paper. I need something to log in my accounting software and file as proof I have purchased something with company money.

 

---------- Post added 07-08-2014 at 11:47 ----------

 

I do invoice obviously, but no payment on invoice with 30 day terms etc it is all part of the ecommerce setup so no separate system is necesary.

 

Freshbooks and Hiveage look good if you havent already invested in an invoice system

 

I know nothing about freshbooks or hiveage. Do they log / account for all your purchases and sales, even ones not done by ecommerce eg coffees or lunch for clients or Postage stamps etc?

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Perhaps he/she is confusing invoicing with a credit account?

 

I think they are as well.

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Thanks for the input guys.

 

Freshbooks is one of the systems that we integrate with, meaning we'll scan twice a day for any overdue invoices and automatically set the ball in motion to chase.

 

So it seems from the feedback here that the volume of invoices you issue is quite low, so it probably doesn't warrant using a system to chase them up.

 

I'd be interested to hear from companies who may issue 50 - 100 invoices per month, do you know anyone on the forum who I could contact to ask a couple of questions?

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Thanks for the input guys.

 

Freshbooks is one of the systems that we integrate with, meaning we'll scan twice a day for any overdue invoices and automatically set the ball in motion to chase.

 

So it seems from the feedback here that the volume of invoices you issue is quite low, so it probably doesn't warrant using a system to chase them up.

 

I'd be interested to hear from companies who may issue 50 - 100 invoices per month, do you know anyone on the forum who I could contact to ask a couple of questions?

 

You might be asking the wrong sector asking small businesses if you want that many invoices. We try to consolidate our invoices so only generate about 25 per month. The value of those is quite significant though. A single account spend can be £10k or more each month and my clients all have different payment terms. The longer their terms, the more we charge. Its more important to chase a large invoice than one for less than £1,000.

 

Its easy to print off a client statement from our accounting software in seconds so it easy to see who has invoices overdue. An email reminder will be a waste of time. You need a surcharge, to put the account on stop when they want something or telling them you are filing a CCJ as an effective way of getting the invoice paid.

 

I have parted company with my clients that pay late now, I don't want to waste time on them. Some people are happy to pay up front to save being surcharged.

 

Do you have any experience of dealing with accounts departments? It doesn't seem as though you have from your comments. What do you think an email reminder is going to do?

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You might be asking the wrong sector asking small businesses if you want that many invoices. We try to consolidate our invoices so only generate about 25 per month. The value of those is quite significant though. A single account spend can be £10k or more each month and my clients all have different payment terms. The longer their terms, the more we charge. Its more important to chase a large invoice than one for less than £1,000.

 

Its easy to print off a client statement from our accounting software in seconds so it easy to see who has invoices overdue. An email reminder will be a waste of time. You need a surcharge, to put the account on stop when they want something or telling them you are filing a CCJ as an effective way of getting the invoice paid.

 

I have parted company with my clients that pay late now, I don't want to waste time on them. Some people are happy to pay up front to save being surcharged.

 

Do you have any experience of dealing with accounts departments? It doesn't seem as though you have from your comments. What do you think an email reminder is going to do?

 

Hi Chez,

 

I might not have made myself clear earlier. With regards an email reminder, this isn't the only thing the product will do as you are correct, most people would ignore it.

 

So the idea is to specify a workflow. A workflow could be:

 

1) 2 days after the terms have elapsed - Send a reminder by email with a link to settle debt now (either all of the debt, or pay off certain invoices if they can't afford it all)

2) A further 3 days after the terms have elapsed - Send an SMS with a payment link, and informing that further action will be taken if no payment is due

3) A further 4 days after the terms have elapsed - Send a letter with a formal request for funds

4) Either continue to send notifications until all debt is settled, or pass on to a debt collection agency

 

Additionally, we do have an option to add a surcharge (% of overdue debt, which can optionally increase as more time elapses).

 

So, the email reminder is just one of the options. Generally, you aren't going to be sending threatening letters which could jeopardise future relations if a gentle reminder will do (maybe they forgot?).

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I think legally a surcharge can only be added once and not then increased, IIRC

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