• Invoicing and client payment delays may cause cash flow swings that could potentially leave your firm more financially vulnerable or negatively impact your daily business operations. 
  • Practical strategies, such as sending invoices promptly, utilizing accounting platforms with automation, and offering multiple payment options, may help your business shorten payment cycles and reduce administrative time spent on invoicing and bill collections.
  • Banks may support your business with tools and services designed for professional service providers, such as treasury management tools, merchant services, and cash flow dashboards. 

Billing and payment delays may disrupt cash flow for professional service providers, potentially preventing firms from investing in staff, expanding service offerings, or capitalizing on growth opportunities. 

Taking a different approach to invoicing may be one way companies move toward a steadier and more predictable cash flow. Below, we present a series of advanced strategies, digital tools, and banking solutions to consider implementing in your business. These suggestions may help you spend less time chasing payments and more time serving clients.

Unpacking Some Common Payment Challenges For Professional Service Firms

It helps to zero in on the problem first before looking for solutions. Below are some possible pain points that service providers may face when it comes to invoicing and receiving timely payments.

Late or Inconsistent Payments

Client payment delays may happen for several reasons. Sometimes, clients may prioritize paying invoices for physical goods their business needs over service invoices. At other times, the invoice may require internal approval at various levels before the client can pay. 

Manual Invoicing

Paper invoices that clients get in the mail may be easy for them to toss into a pile of other to-dos because of the work required to pay. Whether they call your office or mail in a check, it's a multi-step process that takes time busy professionals don't have. Some invoices may never make it out of the to-do pile, lying there forgotten among other labor-intensive tasks they'll "get to later." Similarly, sending PDFs with no clear payment link may have a similar fate. Instead of being able to click a link and quickly enter their card information, the client may have to follow similar steps as when paying a paper invoice.

Tracking unpaid invoices sent by mail or email may also require manual follow-ups, which takes time and slows down the payment cycle. 

Scope Creep and Unclear Terms

Some clients may be hesitant to pay more than the initially agreed-upon price, even when the project expands beyond the original scope of work. Clients may also think they have more time to pay if you don’t spell out your payment terms on contracts and invoices. 

Unclear Picture of Outstanding Invoices:

If you don’t have a clear snapshot of who owes how much and by when, it may be weeks before you realize a client hasn’t paid. You may miss the opportunity to help the client avoid late payments by sending reminders or reaching out soon after the deadline to keep the payment process on track. 

3 Invoicing Approaches That May Help Reduce Delays

Sending prompt invoices, clearly itemizing your services, and being transparent about your payment terms are just a few ways that may keep your accounts receivable from getting too high. Here’s a closer look at these approaches: 

  1. Send invoices promptly: Instead of batching invoices at the end of the month, consider sending invoices as soon as a project is completed. You may also choose to divide the project into phases and bill after reaching each milestone. 
  2. Set clear terms upfront: Consider outlining terms, accepted payment methods, and late fees in contracts to encourage clients to pay on time. Also consider requesting upfront deposits for large, one-time projects to potentially reduce the financial consequences of large payment delays as the project progresses. 
  3. Itemize services clearly: Providing transparency about your services is one approach that may help reduce client pushback when there’s scope creep or changes to the original agreement.

Exploring Digital Tools That May Help Streamline Payments

If your invoicing and bill collection process involves a lot of manual work, consider using digital tools to improve the speed and accuracy of your processes. Some tools that you may consider for your business include: 

  • Automated invoicing or accounting platforms: Adopting invoicing software or accounting platforms with automation may reduce admin time and errors.  
  • Integrated time tracking and billing: Having a system that tracks time on projects may help ensure all billable hours are accurately recorded. There’s also a clear record that may be used to support internal reviews or resolve client billing questions. 
  • Digital payment options: Adding ACH and credit card payment options to your invoices may help speed up the payment cycle, especially when compared to receiving physical checks. Another idea is to consider adding a payment option on the client portal. 
  • Automated payment reminders: Gentle nudges before payments are due may sometimes be enough to get your business paid on time. In other cases, escalating notices for overdue invoices may help keep late invoices top of mind for busy clients. 

3 Strategies to Smooth Cash Flow Between Invoices

Billing and payment delays are two reasons for cash flow disruptions, but what about the time between invoices? If you bill at the end of the month, most of your receivables might come in at a similar time. Unexpected expenses or sudden investment opportunities may leave you with less cash on hand than you need until the next month's receivables roll in. 

Effectively managing these periods of limited cash flow may help your business maintain stability in its day-to-day operations, including covering routine expenses such as payroll and your own vendor payments. 

If you need help filling or identifying potential periods of cash flow gaps, consider whether any of these three strategies may be right for your business:

  1. Business line of credit: A business line of credit may be used as a short-term financing solution to help bridge the gap between invoicing and when expected funds are received. 
  2. Cash reserves: Consider keeping a cash reserve of three to six months of operating expenses in a savings or money market account. This cushion may help your business better weather financial storms and cash flow shortages. 
  3. Cash flow cycle analysis: One approach for managing cash flow fluctuations is to be proactive rather than reactive. Identifying potential seasonal and cyclical cash flow gaps may help you time vendor and staff payments more strategically. Regularly analyzing your cash flow using digital tools may also help spot potential issues before they happen. 

How Banks May Support Professional Service Providers

Banks support professional service providers in various ways. Those catering to small businesses may offer a range of financial tools that support your business needs. When it comes to improving invoicing, billing, and cash flow systems, consider looking for banks that provide some or all of these services:

  • Treasury management tools: Services like remote check deposit, ACH debit, and online portals to view customer payments may help streamline receivables and reduce payment times. 
  • Integrated business checking and merchant services: Having ACH, wire, and card processing linked into your business account may help simplify the number of systems you use for client payments and reduce the time it takes to reconcile accounts. 
  • Cash flow dashboard: You may be able to send digital invoices, view real-time information on your receivables, monitor and forecast your cash flow, and track expenses all from the same place where you bank. 
  • Relationship banking: Some bankers specialize in working with professional service firms. That means they’re familiar with many of the financial pain points of the industry and may be able to offer more tailored advice on your business’s payment issues.

Shaping a More Resilient Approach to Cash Flow

Your company’s invoicing and collection methods may influence how and when clients pay. Tweaking one or more of your processes may result in more predictable client payments, less admin time spent invoicing and sending reminders, and steadier cash inflows. You may find yourself with more time to serve clients and reinvest in your business’s success when you spend less time chasing checks. 

Combining best practices with digital tools and a bank that supports your business’s operations may leave you with more time to serve clients and cash to reinvest in your business’s success. PNC is here to serve you with products and services that may help your business run more efficiently. Learn more about PNC's solutions for professional service providers.