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Answer these questions before you send an international invoice

Answer these questions before you send an international invoice

With all the online tools available to us today, invoicing is a fairly straightforward process. The hard part is determining what to sell and what you’ll charge. After that, deciding on payment terms and setting up invoicing workflows happen pretty quickly.

But there’s one thing you might not think about: if you’re only invoicing domestically, you already know how business works by virtue of where you live. Accepted payment methods, standard payment terms, and approximate tax rates are all familiar to you.

All that knowledge goes out the window the first time you invoice an international customer.

Think about it: if you’ve ever taken a trip outside your home country, what did you do to prepare? You probably got a small amount of the local currency from a bank. Maybe you did a little reading on the local language, cultural norms, and cuisine. You might even have bought some special clothes for your trip.

In order to make sure you don’t violate any laws or pay unnecessary fees, you’ll need to take similar measures before sending your first international invoice. Here are a few of the most important questions to ask:

What are the business practices where you plan to send invoices?

Before dipping your toe into international waters, make sure you learn a little about how businesses operate.

  • Are there any country- or region-specific taxes that apply to sales?
  • Are there any steps you need to go through to do business in the new country - like registering with the government, or filling out forms?
  • What type of contract language and clauses can you expect, if you’re dealing with contracts?
  • Are there any business practices native to your home country that are frowned upon in the new country?

Make sure you fully investigate business practices before it’s time to hit “send” on that invoice. Having this information will help you and your prospective customers start the relationship right.

Related: A quick guide to business etiquette around the world

How will you handle international transactions?

Once you have a better understanding of the business climate, it’s time to think about all the inputs related to payment. Some of these questions may be answered by your previous research; however, it’s still a good idea to focus on them specifically.

Do you want to accept payments in the local currency or your home currency? If you accept payments in the local currency, remember that exchange rates can swing widely even in short spans of time. And be sure that your invoicing platform offers the local currency, so customers don’t have to take the time to calculate the exchange rate on their own.

What kind of payment schedule do you want to enforce? Agreeing to a payment schedule upfront allows you to plan out payments, with the goal of choosing times that don’t impact the exchange rate significantly (if possible).

What payment methods will you accept? Make sure to research international payment methods that work for you and your customers. Know the fees upfront so you can make informed decisions.

Though they still have higher fees, wire transfers are popular with international payments. They generally incur just a flat fee, rather than the percentage-based fees charged by services like PayPal and other payment gateways. And if you do enough business in-country, consider setting up an international bank account to avoid fees.

Related: Should you add wire transfers to your list of payment options?

All these inputs on international business practices, payment methods, and payment terms will help inform the invoicing processes you create for international customers. And if something new crops up, you can always go back and make changes.

Want to know how Invoiced supports robust international invoicing? Contact us for a demo to learn more.

Ask 3 these questions to see if usage-based billing is the right fit

Ask 3 these questions to see if usage-based billing is the right fit

If you look hard enough, you can find instances of usage-based billing in nearly every facet of life. Homeowners pay for water, electricity, cleaning, and lawn services based on how much they use. Yoga enthusiasts might choose to buy a class punch card and pay only for the classes they use. Even some daycare centers let you pay for usage by the day or even the hour.

And though flat-fee subscription billing has grown by leaps and bounds in recent years, there’s still a case to be made for usage-based billing. A business may need to bill customers on a monthly basis or quarterly basis in varying amounts - depending on how much of a product or service the customer uses.

If you’re thinking about usage-based billing and whether or not it applies to your business model, consider these 3 questions before you make a decision.

Do your customers prefer to pay for constant access to a product or service, or only for what they use?

Think about a couple of “constant access” models to start - your cable provider, for instance. If you still have cable, you probably pay a monthly fee for online access, rather than access each time you connect. Part of what you are paying for is the security of being able to connect at any time. Another good one is a gym membership. When you join a gym with a monthly subscription fee, you’re paying for access to that gym at all the posted hours, regardless of when you use them.

Usage-based billing isn’t a good fit for either of these models - at least, not until the cable companies allow you to pay only for the channels you want to watch. But it is a good fit for customers who prefer to pay only for what they use.

Would you be happy to pay for more electricity or water than you actually use? Probably not. And instead of a gym membership, you might prefer to go to a cycling or pilates studio. Do you want to pay for more cycling or pilates classes than you attended? Not unless you are gifting a class to a friend or family member.

That’s not to say businesses can’t get creative and flip things on their head. That cycling studio could create a membership fee that functions just like a gym membership, with unlimited access to all classes. And the cable company might experiment with a fixed + variable billing model - the fixed part being internet access, and the variable part being the number of channels you buy.

But for the most part, the best way to decide if usage-based billing works is to classify your products and services as “constant access” or “pay per use”.

What’s your tolerance level for a wide variance in monthly revenue?

One of the great things about fixed subscription billing is predictability. As a business owner, you know that with a certain number of subscriptions per month, you’ll have a set amount of cash coming in. That’s incredibly reassuring in a world of uncertainty.

Usage-based billing has the opposite effect. With customers paying only for what they use, it’s difficult to predict how much cash you’ll bring in each month. Historical data (if you have it) can help give you a directional estimate, but it’s no guarantee.

When thinking about potential swings in cash flow, it’s also important to consider business expenses. Maybe your business has very few expenses and can tolerate variable revenues, in exchange for being able to charge based on usage. Or you might have high overhead like rent, servers, store staff, and the like that make usage-based billing a risky prospect.

One way to give yourself a feel for usage-based billing is to look back at a year’s worth of customer transactions. Instead of the previous billing method, decide on what each unit is, how much you’ll charge, and then recalculate all the transactions. Break out the recalculated revenues by month and compare them to monthly expenses.

Do you have the infrastructure in place to implement usage-based billing?

Let’s say your customers prefer to pay per use, you’re comfortable with varying cash flow, and the financial outlook for usage-based billing is positive. Do you have the internal systems to support it? An electric company has meters that record each customer’s electricity usage, and feed that data back into their billing system. You need a similar setup for the products and services you sell.

Make sure you can easily record and track products and services used, and your billing and invoicing system allows you to directly connect to these usage records. Online invoicing platforms like Invoiced offer automation for usage-based billing. Usage records are recorded on each invoice, and the next billing cycle triggers a new invoice to each customer.

Want to know how Invoiced supports a robust usage-based billing strategy?Contact us for demo to learn more.

What are the business benefits of AutoPay?

What are the business benefits of AutoPay?

We’re all aware of the benefits consumers reap from using auto-payments. Just ask anyone who has auto-payments set up for their mortgage, rent, cable, or electricity bill, to name a few.

Each month, the business in question automatically charges the customer’s credit card, based on the initial authorization and payment details provided by the customer. There’s no need to remember to pay a bill, or take the time to write a check and mail it in.

But there’s also the other side of the transaction: the businesses that offer auto-payments. Do these businesses receive benefits from using auto-payments as well? They definitely do - and in some of the same ways as consumers. Here’s a short list of the reasons why businesses should consider auto-payments:

Time savings

How much time does your Accounts Receivable (A/R) team spend collecting payments today? Whatever it is, the overall amount of time is drastically reduced with the addition of auto-payments. No more mailing out paper invoices every month, manually recording checks, or spending time repeatedly following up with late payers. When payments are on auto-pilot, the only thing you’ll have to manage are the occasional declined credit card and any inquiries about billing errors.

Related: How to save time on credit card retries with dunning management

Decreased costs

Eliminating a lot of the overhead related to payments saves money, too. Implementing auto-payments allows you forgo purchasing things like paper, stamps, and envelopes. And the time your employees would spend on mailing out invoices, manually processing payments, and collecting late payments, can be translated into reduced hourly costs - or extra time to focus on true exceptions or optimizing A/R processes.

Related: Optimize A/R reconciliation with these 4 strategies

Improved customer experience

If you’ve ever accrued late fees or received follow-up calls, you know how damaging both of these activities can be to customer relationships. Auto-payments remove both these steps from the equation. All your customer has to do is enter payment details and authorization upfront, and the transaction bills automatically - no reminders required.

Regular revenue

Converting customers to auto-payments means that you bill on a predetermined billing date, according to your schedule. That means no waiting around for the customer to send in a check - payment is processed immediately. With customer payments coming in a predetermined date, your business is much more liquid - and looks better on paper. Days Sales Outstanding (DSO) becomes an irrelevant metric, in that all payments are processed the day they are due.

Related: Measuring collections: use these 2 metrics for a quick snapshot

Higher purchase amounts

This might not ring true for every industry, but it’s worth considering: a recent study by Duke University found that both residential and commercial customers increased electricity usage after switching to auto-payments.

Related: Energy Use Rises When Customers Switch to Automatic Bill Pay

Autopayments may encourage customers to spend more, given that they aren’t looking at how much they spend on a regular basis.

Autopayments provide real benefits to both businesses and customers. Want to know how Invoiced’s AutoPay functions can support your business? Contact us for a demo to learn more.

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