In this step of the cash conversion period, you issue an invoice (bill) to your customers or clients for the completed sale of your products or services. An invoice includes the following information:
The completion of the invoice is an important step in the cash conversion period. Your lack of attention in this step can unintentionally lengthen the cash conversion period. Your invoice actually begins the cash collection process for your completed sales. You've probably figured out by now that most customers don't pay without first receiving some form of invoice for the goods or services you sold them. Invoices serve as a reminder to your customers that your goods or services have been delivered. Invoices also serve as a reminder to your customers that they have an obligation to pay you.
The invoices should include the date they were prepared. These dates are important because they serve as the starting date for your credit terms. Customers generally have 20 to 30 days from the date of the invoice to pay the amount listed on their invoice.
You can shorten the cash conversion period and improve your overall cash flow
by making sure you prepare invoices promptly. If possible, try to prepare
invoices immediately after you've delivered your goods or services to each
customer. Don't wait until the end of the month to prepare invoices —
this could add as many as 30 extra days to your cash conversion period! Don't
wait until the end of the week to prepare invoices — this could as many as 7
extra days to your cash conversion period!