Receiving payments on time have a direct impact on the cash flow of your business. That is why it is vitally important you know how to keep track of client payments. If you are unorganized, your business will suffer because you may not be able to pay for expenses to run your business.
In this guide, we'll walk you through how to track customer payment data to ensure you have the correct information for your business.
Note: If you want to keep track of client data by using a cloud-based software, try Bonsai. You can create, send, track and manage all of these things in one place. Save yourself from the hassle of manually recording your invoices and try Bonsai 14-day for free today.
All tracking customer payments requires is good bookkeeping. If you have a proper bookkeeping system in place to track customer payments, then you may be safe.
There are plenty of options you can use to track business payments. You could do it manually with a Microsoft excel or self-employment ledger worksheet, to you could do it with online software. Just be sure all the invoice details are accurate. With a Google doc excel sheet, multiple users can be editing the information at the same time.
You'll want to keep track of things like:
Now, let's get into why many folks struggle to keep track of payments from customers.
When you break it down, tracking invoices and payments sounds easy. After all, you just need reconcile each incoming payment with a client and invoice number.
But tracking physical copies of invoices in the mail can lead to many complications.
There are many moving parts. like clients paying you late, sending invoices, recording invoices or payment details, and waiting for payments to clear the bank. There would be long lags between each stage of the process.
Sure, you'd be able to update and track how much 5 or 8 of your clients paid you.
Imagine updating payment data for 20-50 different clients. You'd quickly realize tracking invoices manually can get messy. Manually double-checking invoices and payments to make sure they match can take weeks or often months. Also, if customers don't cite their invoice reference number, it'd be a headache to match which invoice the payment belongs to.
Larger businesses will need a more organized bookkeeping system to avoid discrepancies in their customer's data.
Depending on your business, these unorganized payments can hurt how your operations function.
That's why keeping track of payments with software can help you make the process a lot easier.
There are many apps and software options out on the market, but ours has it all. Bonsai can help you streamline your entire cash flow recording with our software. Our cloud-based system allows you to keep track of your finances and avoid any manual mistakes. The invoicing program updates your ledger automatically every time you write a check or make an ACH payment.
Bonsai helps you make invoices, automate payment collection, send reminders, cut down the time needed to get paid and make the whole process easier. If you are sending and tracking payments manually, there's no way to find out if an invoice has been seen by a client.
You could be left in the dark waiting for a response, only to learn that they have not even seen the invoice.
Your data will be password protected to help prevent fraud and other wrong use of your information. Fraud and abuse is a potential danger of manually tracking your expense.
Our software will collect payment information like: date the payment was received, business name, order or invoice number, and if the customer is late. All of this can be quickly downloaded when tax season comes around.
Along with our invoice tracker, you'd be able to track time for work and manage expenses for taxes. Making the decision to switch to software like Bonsai could be the best decision for you and your team.
Claim your 14-day free trial here.
Our new freelancer bank account, Bonsai Cash, allows you to track all your client's payment in one ledger automatically. A business account is free to open with a Bonsai account. Not only will you be able to use templates and send invoices, but you'll also be able to use our software to store and manage your payments in one account.
Bonsai Cash also comes with an "envelopes" feature. You'll be able to open sub-accounts within your business bank account to better organize your finances. For example, you can create a tax savings account envelope. Every time you get paid, a percentage of the payment would be deposited into the account automatically. With Bonsai Cash, there are no hidden fees or monthly minimum balance requirements.
As a business owner, if your personal accounts are mingled with your work ones, you’re more exposed to risk. If anything happens in your business finances, it could impact your personal assets like your home.
Note: if you want to reap these benefits, try Bonsai Cash today. You'll get access to our invoice management tools, ready-to-edit templates and get access to our bank account. No hidden fees or monthly minimums involved. Open and use a new account today.
A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.
Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.
Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.
The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.
Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.
For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:
Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.
Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.
If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.
That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.
There are some types of contracts which must be in writing.
The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:
Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.
Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.
Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?
Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!
If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.
Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.
Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.
So, ultimately, the question is: written or verbal agreements?
Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.
Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.
Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.
A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.
Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.
With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.
Why not secure your business today and sign up for a free trial?