An invoice is the first and most crucial step in getting paid for your services and streamlining your account receivables. While this may seem rather obvious, many businesses—particularly, small businesses—still struggle with it. Some invoicing mistakes that businesses often make include sending invoices late, displaying incorrect information, duplicating them, and loss, among many others.
These issues make it hard for customers to pay invoices promptly, if at all. Unpaid invoices quickly lead to cash flow problems, and the consequences of cash flow problems are pretty obvious. What can you do to ensure that your invoices get paid each time? This article shares invoicing best practices to make sure you master this process for your business.
Automate your invoicing process
The days where you need to create invoices manually are long gone. Manual invoicing processes are laborious, time-consuming, and subject to human error. They can end up taking a significant portion of your billable hours for your teams too. The result is a dent in your budget. Technology has provided far easier and more reliable ways of creating, sending, monitoring, and tracking invoices which you can tap into if you haven’t already.
Invoicing tools such as this free estimate template from Jobber helps you to streamline your invoicing by allowing you to customize initial estimates in a way that fits in with your industry niche and brand, and which can later be converted into an invoice and shared with your customer the moment a job is done. Systems such as this ensures invoice information flows seamlessly between projects, relevant departments, and customers. It also allows you to make them look more professional, especially if you are starting out.
Send invoices promptly
When to send an invoice is an issue businesses often struggle with, particularly in the service industry. When you have jobs lined up one after another, invoicing your customer immediately after a job is done may not always be possible. However, wait too long and you may forget to invoice at all or forget what to include.
Invoice your customers as soon as you can after you complete a job. This facilitates you being paid on time, and reduces the time taken for them to get paid. Automated invoicing software such as Jobber mentioned above, will help you do this easily with just a few taps on a smartphone or tablet.
Include all the relevant information
There are fundamentals to creating an invoice. At the least, it should look like an invoice with the word invoice clearly indicated. Below are invoice essentials you need to include:
- Unique invoice number for ease of reference for you and the customer
- Invoice issue date
- Your business name, address, and contact information
- Customer details
- Itemized description of work carried out
- Invoice payment terms and due date
- Your payment details
- Late payment terms
- Any other relevant information
When you include all the necessary elements on the invoice, it eliminates confusion. It allows your customer to pay on time because they have all the information they need. The second anything is unclear, the payment process is slowed down. This arises from the time spent seeking clarification.
Make it easy for customers to pay
While you may have a preferred mode of payment, consider letting your customers pay in the methods that they find convenient. If a customer prefers to make a direct bank deposit, let them do so. If they find online payments more convenient, let them pay that way as well. Giving your customers many options to pay invoices makes them appreciate your flexibility by paying early or on time.
The most common methods of payments include bank deposits, card payments, checks, and online payments. New payment methods such as crypto payments are slowly emerging as the popularity of cryptocurrencies increase. Keep abreast of new developments and trends to ensure you are maintaining your positioning in the market.
Incentivize early payments
The aim of effective invoicing is to improve cash flow in the business. That means facilitating all ways that customers can pay you as fast as possible. One way you can do that is by offering customers a discount when they pay early. However, you need to consider this carefully to come up with a discount that will benefit both you and the customer.
Giving high discounts, particularly to customers paying higher amounts, can create a dent in the amount you receive. But a discount isn’t the only way to go about it. You can also look for other incentives and be creative.
Impose late payment penalties
Some customers won’t pay on time, no matter how good your invoicing practices are. However, when the lifeline of your business is at stake, penalizing customers for late payments can spur them into action and encourage them not to forget.
The penalty fee doesn’t have to be huge. You should be careful not to scare away or antagonize your customers. While most businesses start talking about late penalty fees after the invoices have fallen due, the best practice is to include penalty terms in the invoice itself. That way, both you and the customer are on the same page about what will happen if the invoice isn’t paid on time.
Know when and how to follow up
Following up invoices doesn’t need to start after a customer fails to pay. The first time needs to be soon after you’ve sent the invoice to confirm receipt. Sometimes, a customer fails to pay because they’re not aware of your invoice. Calling or sending a follow-up email a few days after sending them an invoice allows you to confirm that indeed the customer is working on paying the invoice.
You can also reach out a few days before the due date. Following up ensures that a customer doesn’t forget about your invoice, deliberately or otherwise. However, you need to always remain professional, friendly, and polite in your follow-ups or reminders.
Also check about – What to Keep in Mind to Make Your Business a Success
Effective invoicing is crucial to getting paid on time, which in turn improves your cash flow. The way you create and manage your invoices directly impacts how long your business survives. So be sure to employ the invoicing best practices to ensure you get paid on time, improve cash flow, and benefit from sustainable and profitable business practice.
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