Is your contract delaying your ability to raise an invoice?
This is an interesting question to answer as it doesn’t apply to all businesses and obviously doesn’t apply when payment is taken up front. However, there are some cases where you’ll provide a product or service to a client but for various reasons, you can’t invoice them straight away, this is normally because there’s something in your contract preventing you from raising an invoice.
If you’re offering “try before you buy” on your product or service, you may have a clause in your contract saying you won’t invoice the client until the end of the trial, or if you invoice them, that the money isn’t due until the end of the trial, if they want to keep it or continue using it.
This is a great opportunity for the client to check the suitability of your product or service and to make sure it complies with your contract and what you say the product or service will do. However, think about this on a large scale, can you afford not to be paid for 7 days, 30 days, or longer, while someone is trying your products and services for free. What if 10 people are on a trial, or 100, or 1000. Can you afford this?
If it’s in your contract that they don’t owe you any money until the end of the trial, then although you can raise an invoice, it won’t be due until the end of the trial.
If you’re selling a subscription-based product or service, then you can only invoice for the period specified in your contract. You can still include these clients in your projected income, but in terms of cashflow, you can invoice the amounts as detailed in your contract, no more, no less.
If you sell high-value products or services, your contract can be written to allow for spread payments, for example, 50% up front and 50% on completion. However, make sure you invoice and receive payment for the first installment before doing the work or giving the client the product or service. Even more importantly, be strict when claiming the remainder of the money at the end. If you don’t stick to your contract, why should your customer?
If you’re carrying out work for a client and buying products or services from somewhere else to fulfill your client’s order, you may need to wait for prices from contractors before you can invoice your client.
For example, a Project Manager might need an electrician, decorator, carpenter, gas installer, carpet company for a refurbishment project and there may be delays in the supply chain which have a knock-on effect with your invoicing and collecting payment from your client.
If you’re buying in products or services to fulfill your client’s order in a different currency you may not have access to the correct exchange rate that will be charged by your bank. To solve this, I recommend having your own fixed rate for currency conversion with a buffer, that allows for the pound to go up or down and suggest reviewing the rate from time to time.
Over time, products and services you buy in to sell to your clients may go up in value and you need a clause in your contract to allow for the increase otherwise you’ll end up absorbing the additional cost. Taking the time to write a clause to allow for price increases with a notice period is essential and if it’s in your contract then it won’t delay your ability to invoice at the new rate.
To solve these issues, you can easily add clauses to your existing contract and I can help you with this. Or, if you need a new contract written then I can write it for you from scratch. For more information please get in touch.