Every Startup owner knows the struggle and importance of dealing with invoices.
Money is the core feature of your business and you don’t want to mess it up, especially when you are just starting off, right?
Everybody carries a manual of all the right things to practice in their business but it’s equally important to know what to avoid.
Invoicing is not a task that provides much stimulation or excitement, it’s a task that provides a steady flow of income. It is simply not enough to send out accounts to your customers. Following up needs to be an inherent part of the process. Many customers will push your account to the side until they need your services or you keep pestering them. Of course, this isn’t by choice in most cases but rather a matter of distributing their incoming finances.
Here’s a list of common invoicing mistakes every business owner must avoid:
1. Did You Forget to Invoice?
The most important thing in business is not to assume anything. You may have an ideal business relationship with a customer, and that customer pays you religiously. But, if you forget to send the bill, they may forget to pay you.
Don’t assume that they will pay you even if you don’t send an invoice. There are times when you do get extremely busy, and it may slip your mind to invoice a client. However, that can impact your cash flow considerably going forward.
If you had forgotten once, how many countless times has it happened before but, in that case, you didn’t pick it up? Invoicing is a task that must receive priority.
2. Don’t Put Off What Can Be Done Now
The best system is to invoice right after the completion of any work. By doing this, you know that there is no chance of you forgetting during a busy spell or it slips your mind. The sooner you invoice your customer, the sooner you get paid.
In many instances, if you wait to invoice, the customer has already forgotten they owe you the money and have allocated their funds elsewhere. You cannot afford to stunt your business cash flow.
Have a look at other cash flow mistakes that can affect your business.
3. State the Terms of Work Clearly
Your invoice is the place you need to make sure that your terms of work and payment are direct and understandable. This is not when you can afford to be vague. A customer is not going to pay an invoice that he/she doesn’t quite know what it refers to.
If you clearly state the work carried out in detail and the terms, they will have no option other than to pay you on time.
4. Contracts – A Handshake Won’t Do
The economy today is such that you never quite know what is going to happen from one day to the next. Signing a basic contract with your customer will safeguard you both, keeping you on an equal-footing with them about the terms of payment and the work to be completed. One should always be clear about the invoice payment terms you are mentioning.
You don’t want to suffer the consequences of a deal gone wrong and have no paper trail to back your case.
5. The Department
In many large corporations, particular departments deal with payments only. On agreeing to contract terms with a customer, you need to make sure to get the correct company billing name, the name of the person in the department that settles the bills and a contact number for that person.
Sending an invoice to the wrong place can delay your payment by a considerable time as well as cause huge frustration. There is nothing more unprofessional than not knowing who is paying you and talking to that person directly. Making waves with the wrong people can have detrimental effects on your business relationship with that company.
6. A Detailed Invoice Is Key
Misunderstandings do happen, and this rings especially true when it’s time to make payments. Your invoices should leave no room for guessing or delays. Always be sure to include all the information that the customer and the governing laws of your country may require. These usually include:
- Company name and telephone number
- Physical address
- The name of the individual you dealt with as well as their contact details
- Invoice number
- Invoice date
- Due date
- Any applicable tax numbers relating to your company and that of your customer
- Payment terms
- A detailed listing of the products supplied or the work completed
Learn how to create a professional invoice and get paid faster.
7. Detailing and Itemization
When it comes to payment, everybody wants to know what exactly they are handing their hard-earned money out on. Always ensure that each product purchased or service rendered is listed and a value attached to it.
Should you be charging by the hour, your invoice needs to state the number of hours and the related fee per hour.
There is more likelihood of your customer paying you quickly if they can see exactly what they are paying for. A vague invoice with a lump sum figure is going to cause delays that your business can’t handle.
8. Numbers – The Facts
The tax man is not somebody you want to play around with. Should you be audited for any reason, you don’t want to be fumbling around looking for paperwork.
Using a numbering system will allow you to track, locate and produce documents with ease. A numbering system allows you to be on top of your debtors. This way, you will be able to find out which bills are to be paid and where the invoices are to be sent.
Customers will not be happy if you keep sending them the same bills that they have already paid.
9. Backup and Prevent Disaster
Computer systems these days are rife with bugs and viruses and can crash at any given moment. Sure, you can back your information up onto an external USB or drive. But, like your computer, these can also give in at the drop of a hat.
Where would that leave you? The best option these days is to back up your invoicing, accounts and important documents to the cloud where the retrieval will be easy.
Read about benefits of cloud accounting.
If your company is in the position, offer your customers an incentive to pay you on time. A minimal discount on early payment is always welcomed. It will encourage your customers to give your invoices preference.
11. Branding and Formatting
If you want to be regarded as a professional, you need to exude professionalism in every aspect of your business. A professional approach will include the service you provide as well as the invoices you submit to your customers.
Brand your invoices with your company logo. Besides looking professional, the name of your company is also more likely to stay at the forefront of their minds. Ensure that you edit and format your invoices to portray professionalism.
There is nothing more unpleasant than submitting an invoice with spelling errors.
If you can’t complete an invoice in a correct manner, how will they have faith that you completed the job at hand correctly?
12. Payment Options
You must ensure that you make it easy for customers to pay you. Provide a variety of options so that there is no excuse for them not to. Credit card payment, direct deposits, and check payments are standard modes of payment.
Other advanced forms of payment are also active such as bitcoin and even PayPal payments. These are fast and secure.
The more options you offer, the fewer excuses your customers can come up with.
13. Marketing Strategy
Send out your invoices but don’t leave it at that. Include marketing material at the same time. Add some reading material on your upcoming specials or offer incentive deals for returning customers.
14. Unspecified or Agreed to Fees
Additional and unexpected fees on any invoice are a nightmare for any customer. It could be a good reason for them to delay your payment or not to pay you at all. Don’t add extra costs to an invoice unless it has been discussed with and agreed to by the customer.
Adding amounts to the invoice without the prior knowledge of your customer is a good cause for them to mistrust you.
Maybe they will pay you, but they will never return or recommend your services. The act of inflating the price in such a way is unprofessional.
15. Manners and Politeness Go A Long Way
Use your invoices as a channel to make your customers feel important and necessary. A simple thank you note or a wish for them to have a good day will work wonders in encouraging repeat business.
Your invoice is not merely a method of receiving money for services or products rendered. This is your opportunity to show your professionalism, courteousness, and transparency -three things any customer would appreciate. Take the time to create invoices that sell your business. Be aware of the common mistakes that can happen when invoicing your customers. Make every effort to steer clear of that trap.
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