5 Invoicing Best Practices for Better Cash Flow

Invoicing best practices

Cash flow management – balancing what is coming into your bank with what is going out – is a challenge for freelancers and small business owners. You may have customers who have purchased services, and that’s great, but if those customers take their time to pay, you may find yourself dipping into cash reserves to meet expenses or operate.

There are 5 invoicing best practices you can follow to ensure that customers pay you faster, reducing receivables and getting more cold, hard cash into your bank account.

Flareapps.com small business tip #0781) Use Invoicing Software

While this may seem like a blatant pitch for Flare cloud accounting software, using accounting/invoicing software will improve your ability to manage cash flow, including invoices and receivables. If you are tracking invoices and invoice payments by hand, you are asking for an organizational nightmare that will chew up time and cause frustration. Online accounting software makes invoice management painless, is efficient, and some applications (like Flare) allow you to accept payments from your customers online. With Flare, you can even examine each customer’s payment history, which can help you create more informed invoicing and credit rules for customers.

Flareapps.com small business tip #0792) Define Shorter Payment Terms

While Net 30 is a fairly standard “default” payment term, there is no rule that says you have to adhere to it. You can decide to only extend Net 30 payment terms to customers who purchase over a certain price threshold. Customers purchasing less costly services could be given shorter terms or even “Payment upon receipt”.

Flareapps.com small business tip #0803) Take Some Payment Up Front

Small business owners providing services can take a cue from freelancers. It has become a fairly common practice among freelancers (web designers and coders for example) to take some payment up front before commencing work, and the remainder upon completion.  This common practice helps freelancers with cash flow. It’s particularly useful to them because customers can sometimes be slow in providing feedback the freelancer needs to move a project forward. A freelancer who takes payment upon completion for jobs that may take a few months (or more) to complete is taking a huge risk. If the project drags on because of client delays, the freelancer may be waiting a very long time to paid. In essence, they could find themselves working for nothing for a very long time. Worse, if for whatever reason the client doesn’t pay at the end, the freelancer has literally worked for nothing.

If you offer services that are project oriented and take time to complete (programming, web design, graphic design, writing) try 50/50 terms: 50% upon commencement and 50% upon completion. Alternatively, try 50/25/25 terms: 50% upon commencement, 25% at a specified date roughly halfway through the estimated work period, and 25% upon completion.

Divided payment terms mean you get money in the bank to start and also ease the pain for the customer, acting a little like a payment plan. Divided payments also ensure that you are not working for nothing for a lengthy period of time.

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Flareapps.com small business tip #0814) Provide an Incentive for Early Payment

Providing a discount to customers who pay early is another way to get paid faster and safeguard cash flow. For example, on large-balance invoices with Net 30 terms, you might provide a 10% discount if the customer pays upon receipt, and a 5% discount if they pay at 14 days. Ensure the discounts are stipulated clearly on the invoice, and as the discount deadlines draw near, send a reminder. For smaller-balance invoices with shorter terms, you could provide a modest discount if they are paid upon receipt.

Flareapps.com small business tip #0825) Periodically Check for Past Due Invoices and Send Reminders

This tip for keeping an eye on cash flow goes hand in hand with tip #78 “Use Invoicing Software”. Using accounting software like Flare allows you to easily check for past due invoices. In minutes, you can review invoices and can easily resend past-due invoices along with a reminder.


Use invoicing software to save time and make it easier to review invoices. Use shorter payment terms to get paid faster. If possible, take some payment up front before commencing work. Consider providing discounts to customers who pay upon receipt or pay early. Periodically check invoices and send reminders to clients with past due invoices.

No matter what payment terms you set, discuss them with clients and get agreement before you begin providing services. Doing so will set expectations. Some small business owners and freelancers are uncomfortable discussing payments with clients, but this reluctance may lead to cash flow issues. “Payment terms” are not dirty words, they are the lifeblood of your business. Stating payment terms clearly and without apology sets expectations and weeds out those customers who may be prone to pay late.

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