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Consulting invoice example for Finance

how do you invoice clients how do you get paid you can do all the work all the marketing and all the sales but until you send that invoice and get paid you're not really in business josh is canada's top business consultant my name is desmond soon and josh is the author of this book the 100 miss you know of entrepreneurship versus the chainsaw now josh talk about invoicing because everyone wants to know about how do you send that invoice if you close the deal you did the marketing you got this client you're excited but did you really close the deal until you send that invoice and how do you avoid you know not getting paid as well too i mean we talk about it sometimes that no deal is actually closed until you've been paid all right yeah and when it comes to invoicing sometimes people feel bad about it it comes from their deep rooted you know feelings about money that money is evil instead of an you know exchange of goods and services is a good thing right so you know people avoid it because they don't like it right yeah they have negative connotations they ask for the money right that's right but it's it's such an important part of it right yeah so i mean the very first thing that we have to you know consider is the frequency of which you're going to invoice okay it's extremely important right now the absolute bare minimum where i've ever seen anybody succeed is monthly right this is the bare minimum invoicing monthly right invoicing month later right so because the the amount that the frequency of which you invoice reduces your risk significantly right so but it's this is very easy to drift here so some people are going to think that okay i'm going to invoice monthly okay but i mean if you're invoicing monthly i mean you are invoicing every single month on the 1st or the 31st or the 15th i don't mean like some months you do it on the first and some months you do it on the fifth and some months you do it on the 10th right i've never seen anybody succeed long term where their invoicing is a monthly which is the maximum time parameter i've ever seen work in any business and then b if it is if you are dealing with that maximum time time parameter you have to be extremely disciplined about the day that it happened and josh even in your book here you have a quote you said 94 of invoices take over 30 days to get paid and that's by paystone right so it's cash flow it's the the lifeblood of your business and if you're not getting paid how are you paying your employees how are you covering your marketing how are you covering all your fees that's right businesses fail because the customer's cash flow team right um so if you know i i challenge business owners because normally monthly is the wrong answer even though it's the commonly thought answer for every business right so what should they be doing um i would suggest most businesses either need to invoice the day the service is complete yeah or weekly and i mean 90 of them right right and you're gonna run up into customers who say this is unconventional i'm used to being billed every month right and i would say well yeah it is unconventional so is succeeding in business 96 of businesses fail and this is one of the key reasons of why they do because they they starve their business of cash flow right right so stressing out the business owners stressing out correct yeah correct i mean we've outsourced a lot of things you know in our uh our cfo services but we actually never in outsource invoicing we've tried but we realized it has to be done so frequently and the follow-up needs to be so persistent that that needs to be an in-house function right because it's happening daily it's like it's like to say that your production is only going to happen once a week or once every two weeks right because it's not just the invoicing it's the follow-up on that invoicing it's processing the payment when the customer calls to you know processing the payment so it is incredibly important that that frequency is shrunk down the best case scenario is its invoice the day the work is complete the next best thing will be weekly i mean we see construction projects and construction projects they might go might be a 90-day project yeah it's very useful to build every single week to purchase materials to pay your staff correct directors yeah and not only that customers start thinking like well there's a there's a little nick on the wall over there i'm gonna withhold the entire 70 000 invoice because this is happening right it flushes out bad customers early yeah because good customers want to pay you bad customers are looking for an excuse not to pay you yeah and if you give them extra time they start thinking in their head you know it's the the saying a lock keeps an honest man honest right uh you know frequent invoicing keeps good customers honest right so it should be done because if they have that hesitation to pay you it's a it's a nefarious subset of individuals right and they we've seen them because we reinforce this culture where you know they're they're stomping in the line at costco trying to get a refund on something right it's like let's find out if your customer who you think is a good customer is a good customer send them an invoice and see if they pay with a smile and say thank you right that's right um because that's how good customers act bad customers you know it's you know make excuses they'll delay and those are red flags already so that's right find out quickly and early instead of letting it drag on for 90 days or 30 days and then you find out and then you're in trouble at that point correct and if you've given them extent like if you've extended your own invoicing terms if you told them my bill on the 15th of every month and then you wait till the 20th well then their 30-day payment term is like well that must not be set in stone either right so you manage that you know that tone of that relationship right if you say you're going to invoice every friday on a job or you're gonna invoice when it's done if you don't do that you've you know indirectly given the customer permission by telling them it's not that important yeah and they can be late so josh another thing that you talk about in your business is charging deposits up front right yeah and so how does that work so now we're we're going even beyond invoicing quickly we're starting what let's charge a deposit upfront right so it helps a lot because some customers they say that they're interested until they pay something you don't actually know if they're interested right so when you charge a deposit you start to see like hey is this customer actually committed to this project this service you know this product right because once they pay a deposit sometimes people they they just don't want to say no whether on on the phone or you know in person or sometimes even in an email they don't want to say no but then you ask them for that deposit if they don't give that deposit it shows whether they're really committed or they're serious it also shows if they're a bad customer right because if they if they're willing to pay you know money for fair value for services they'll pay and deposit right and so there's some industries where charging a deposit can have some regulatory compliance right where you can't charge a deposit in a particular industry or you need a an owner's license to do so right right and you know alberta they have prepaid contractors licenses for example some business subcontractors don't have that yet right yeah so what you can usually do to get around that is what we call a mobilization fee right so it's an amount charge up front on the start right so imagine you can't charge a deposit but when you show up with the materials on day one you can charge for those materials on day one and you can also charge a mobilization fee a reasonable fee for starting the project right it's not it doesn't won't you know put you offside by charging a deposit if you can't charge a deposit because of regulatory issues but at the same time it's going to increase that cash flow so the mobilization fee how much can you charge for that like what percentage are you allowed you know what's a fair amount there's no set fee right but imagine like if you know the materials on a job or a third of the job and the profit's a third on the job right and then the cost of labor is a third it's like well you can charge the mobilization fee you can charge the materials and the the the labor that's two-thirds right and you're waiting for the extra third right or 50 depends on the industry um you know the relationship with the customer your own social proof right so you know we always talk about getting social proof it's like well getting a customer to pay a deposit or a mobilization fee when no one's heard of you it's hard yeah when you come with a good reputation of doing good work and you know google reviews and video testimonials they're like well okay i'm going to give this person an apology because you're definitely someone who can get the job done that's right so charging those deposits are they're key they just speed up immensely the amount of cash flow that you're going to be that you're going to be given right and the the timing that you're going to get that cash flow and you're immediately flushing out the bad customers yeah but what is the number one best strategy josh because i know you saved the best for last what if someone's watching this video right now and by the way if you're watching this and you found it helpful please comment in the comments below josh and myself do answer those questions uh josh what is the best strategy for invoicing the best strategy for invoicing is actually to never send invoices what do you mean by that so rather than sending invoices you need to switch your framework into charging into sending receipts so we're sending receipts not invoices okay this is a mechanism where you have you know a credit card on file yes okay when the work gets complete then we immediately build that credit card right and so imagine if you're taking you know a call and a call center right where it's like yeah we have a call out fee of 50 and then we have an hourly rate of you know 150 an hour or whatever it is right you immediately charge that call out for you the fifty dollars you know then you're going to charge the the call out fee when they're there and then you're going to send them a receipt not an invoice right this is exceptionally important in small value invoices okay right so think service technicians yep where they're doing projects that are you know a couple of hundred dollars right yep you know one of the common requests that we get from people is that hey can you help me follow up on my ar right and then you go through this ar and they have you know invoices of you know a hundred dollars two hundred dollars three hundred dollars right and you have to tell them it's like it's not that you suck at collecting ar it's that there is no possible way to collect on that profitably okay if you're having to reach out on the phone and follow up once twice three times and then get in touch with that person so they can pay that amount yeah um it's just an incredible time stuff you gotta imagine that you have someone in an office making you know 18 20 bucks an hour and they're calling out and you know getting a voicemail leaving a message sending an email right maybe even they send an automated receipt but then it doesn't work and someone's going to follow up on them it's like you will lose money for sure following up on small value invoices because the cost of collection starts to exceed the cost of actually doing the work right right so the the strategy then would be just to get a credit card up front on file before starting any work that's right right okay and it's like hey when we're done we're going to charge this credit card right and you can just start to see it's like some clients will say well i don't have a credit card red flag red flag red flag so now we're going to extend you know credit to a customer who can't get credit themselves from a bank right we're not talking about getting a million dollar mortgage we're talking about getting a thousand dollar credit card right so now right away you see what kind of customer that you're dealing with right and this is something that you have to just put your foot down if you haven't done it before in the past uh even josh with existing clients right you just let them know moving forward you know starting from next month you know we like to take you know our accountant you can even you can even sometimes say your accountant your cfo blame the account then blame the cfo and say hey look we need to get our accounting in order here and we need to have a credit card on file just it saves a lot of time and you know less collection so it is it is tough at first but you have to just do it it will save you a lot of headache and missing out on income coming in so josh any last tips for the business owners watching this video you know you always give a fantastic tip summarize what what should they do is what's the best way to avoid you know invoice early yep invoice often yep get deposits yeah and ask yourself why did i invoice to begin with could i have just sent a receipt rather than an invoice because you had the credit card on file to begin with that's right all right if you enjoyed this video hit the subscribe button turn on the bell notifications and we'll see you in the next video [Music]