Invoicing is a vital part of running any small business because if you don’t send out invoices, you don’t get paid. When the business is in its early stages and you only have a few clients, managing your invoices isn’t too difficult and you can probably handle it on your own. But as the business grows and your client base expands, you can quickly start to lose control. That’s bad news because your invoicing system is there to make sure that you actually get paid and if that falls apart, cash flow problems are just around the corner.
Ideally, you should hire a professional bookkeeper to manage your invoices for you, but that isn’t financially viable for a lot of new businesses. In that case, you are forced to handle it yourself, and it’s vital that you get it right. There are a lot of common errors that new business owners make with their invoices, and if you want your business to succeed, you need to learn from their mistakes. These are the most common things that new businesses get wrong with their invoices.
Not Invoicing Immediately
If you want to get paid quickly, you need to send out your invoices quickly. You can’t blame clients for dragging their heels with payment if you didn’t send them an invoice in a timely manner. If you take your time, the clients are more likely to take their time as well, so make sure that you have invoices ready to go as soon as the work is completed.
The reason that a lot of business owners neglect their invoices is that they have so many other things on their mind. That’s why it’s good to have dedicated employees to handle these things for you, but if you can’t afford that, make sure that you prioritize invoicing. Whenever you take on a new client, look at the end date for the project and set a calendar reminder to get an invoice out.
Sending Invoices To The Wrong Person
The person that you deal with when discussing the project isn’t necessarily the person that is responsible for paying invoices. But a lot of business owners don’t realize this and they send the invoices out to the wrong person. Then it’s down to whoever receives the invoice to pass it on to the right person in their company, and when they have their own responsibilities, that isn’t a priority for them. You will get paid much quicker if you send the invoice to the right person in the first place. So, make sure to ask your contact for the email address of the accounts department or whoever processes the invoices. Make sure that you double check the email address, especially if you are sending a lot of invoices on the same day. It’s pretty embarrassing if you send an invoice to the wrong client.
Using Outdated Payment Methods
Modern payment methods are much faster than outdated ones, so if you want to get paid faster, you should invest in a better payment system. If you send out paper invoices and ask to be paid with a check, you are reliant on the mail, which can be incredibly slow. Then you need to wait for the check to clear before you can access the funds. But if you have a system to accept payments online, you can sidestep all of that hassle and get your money straight away. Using online invoicing systems also helps with organization and financial management. You can easily track all of your invoices so you know exactly how much revenue you are bringing in. when it comes time to file your taxes, you have all of the paperwork you need in one place. You can, of course, file your paper invoices but why waste time doing that when you can have it all done for you?
The other big benefit of taking payments online is that it’s more eco-friendly. Going paperless is one of the best ways for businesses to save money and be more environmentally friendly at the same time, and your invoicing system is a good place to start. Updating your invoicing system also makes things easier for your clients too, and your business looks more professional. Even though it’s an investment, it’s definitely worth the money.
Not Setting A Due Date
All businesses need to manage their cash flow properly, including your clients. So, if they don’t need to pay an invoice right away and it would be easier for them to wait until next month, that’s exactly what they are going to do. That’s why it’s so important that you put a due date on every invoice you send. As long as you make it clear when the payment is due, you shouldn’t have too many problems with people paying promptly. The more specific you can be, the better, so don’t put ‘due in one month,’ put the exact date instead. You can also encourage people to pay up sooner if you offer a small discount for early payment.
Unclear Breakdown Of Payments
When writing an invoice, it’s important that you include a clear breakdown of payments. Businesses need to be careful with their money so they will not simply pay an invoice without question if they don’t know exactly what they are paying for. If you give somebody an invoice that only shows the total amount owed, they are likely to query it and that slows the whole payment process down. But if you give a clear explanation of exactly what they are paying for (materials, labor, tax etc.) they are far more likely to pay up right away.
Creating accurate quotes will also help with any confusion over invoices. Sometimes, clients will dispute an invoice and claim that it is higher than the price that was initially agreed, so they don’t want to pay it. If you didn’t give them a formal quote, there isn’t much you can do here. However, if you sent them a quote in writing, with a clear breakdown of the costs, you can refer back to this and prove that the invoice is correct.
Unprofessional Invoices
An invoice is a business communication like any other, so you need to think about the way that it is presented. You wouldn’t send out marketing materials that are filled with spelling and grammar errors, so don’t send an invoice without proofreading it either. All invoices should include your company logo and information, and they should be numbered to make it easier for you and the client to organize them. Mistakes will not only make you look unprofessional, but they will also make the invoice difficult to understand and the client may have to call you for clarification before they pay it.
Failing To Chase Up Invoices
This is a mistake that a lot of new business owners make because they worry about alienating clients. They want to build a good relationship and they think that chasing people up and asking for payment will sour things. Surely it’s better to accept late payment if it means more work in the future? Actually, that isn’t the case because it sets a precedent. If you allow somebody to pay late the first time, they’re going to push it even further next time and before you know it, you have lots of clients that are always dragging their heels with payment. It’s much better to be firm but polite from the very beginning so clients know that they can’t mess you around. Even if you do lose one or two clients, you don’t really want to work with people that are not willing to pay invoices on time.
There are a few ways to chase up an invoice but a polite email is the best starting point. Everybody is human and, in most cases, invoices are not paid because the client simply forgot. So, a quick email to remind them that the payment is overdue is usually enough to sort the problem. You can use these email templates to help you craft the perfect message. Often, it helps to send a reminder email a few days before the payment is due.
If you have sent a few emails and the invoice still isn’t paid, you should call them up and find out what is going on. If possible, try to call the accounts department directly so you can speak with the person that is responsible for paying the invoice. Don’t be hostile on the phone and remember that sometimes, mistakes happen. Simply ask for an explanation as to why the invoice has not been paid and make it clear that you expect payment immediately.
When clients are being particularly difficult about payments, you may need to take legal action to get your money. This is incredibly rare, but if that is the case, speak to a lawyer and get them to draft up a letter. Usually, this will be enough to get a client to pay up.
Invoicing may not be the most exciting aspect of your business, but it is one of the most important, so make sure to avoid these common mistakes.