Edition 34 – 1 Day = 30 Days

Have you ever stopped to consider the true cost of delaying your invoicing by one day in your business? Not from Friday to the following Monday but the cost of not invoicing at the end of the month and leaving it to the first day of the next month?

Delaying your invoicing by one day will actually cost you more than 30 days. If you raise the invoice before the end of the month and email it to your client, they will record that invoice as a payable in that month. That means payments will be 30 to 60 days away.

If, on the other hand, you delay your invoicing to the first of the next month, you’ll be waiting between 60 and 90 days for payment.

Now, if your work around is to close your month off by day three of the following month, yet backdate the invoice to the end of the previous month, I have news for you. Most of your customers won’t care about the date on the invoice. They will record in their system the date they received the invoice, not the date on the invoice.

I’ve heard all sorts of reasons over the years as to why a business keeps its month open including:

  1. The work is finished, we just don’t have sign off from the customer.
  2. The work is mostly finished, we just had one or two loose ends to tidy up.
  3. The work wasn’t finished, however if we didn’t keep the month open we’d not have met budget.

All of these are excuses that relate to poor systems, poor management or poor accountability.

Over the years I have observed businesses where late invoicing is up to 30% of the monthly total.

Assuming a business has an overdraft of $200 000 and turns over $250 000 per month, that means more than $80 000 is invoiced late. In other words, 50% of the overdraft is required not because the business needs it, but because of inefficiencies in the business.

This pulls $80 000 of funding away from other areas of the business and may require $140 000 of real estate security – simply to cover an inefficient process.

If this sounds like a family business you own or manage, here’s some tips to help you invoice before the end of the month:

  1. Invoice daily — when the job is finished, raise the invoice and send it ASAP.
  2. Work to a weekly budget — most monthly budgets are looked at at the start and the end of each month. Why not break your monthly budget down into weekly targets?
  3. Create urgency — if you need paperwork signed, chase it. Make a nuisance of yourself. The sooner you have it, the sooner the invoice is raised and the job off your desk.
  4. Consider an early month end — some businesses, particularly in the building industry, close on the 25th of the month. Would that work for your family business?
  5. Identify the bottleneck — if anything happens once, it’s unusual. Twice is unfortunate. Three times is a pattern. If you have a pattern, then stop & analyse what your invoicing process is and where the bottle neck sits?

This Week’s Tip

Next time month end strikes, take the time to review when you invoiced “before the end of the month” and when you invoiced “after you should have done”. What’s the cost to your family business?

Contact Us
Our Newsletter

Sign up to our FREE weekly Growth newsletter.

Social
Connect With Dean!
Copyright © 2016-2022 Dean Robinson Group, All rights reserved.