Invoicing is a small but crucial step in the process of supplying a business customer with your goods or services, but unfortunately it is one that many businesses get wrong.
Most of the time this just leads to occasional embarrassment, a missed relationship-building opportunity or minor delays in getting paid, However, bad invoicing practices also exacerbate cash flow problems that can put small businesses in serious difficulties as a result of the invoice not being issued soon after the work has been completed or the product delivered.
Given that invoicing is the part of a business transaction that sees you get paid, business owners shouldn’t need much persuading to put a small effort in and make sure they get it right. Additionally, you will need a decent invoicing system if you want to use Invoice Finance – an increasingly popular form of business funding that can often be cheaper and more effective than a business loan, as it doesn’t have a fixed repayment schedule nor are you locked into long term contracts.
The following top tips will help ensure your invoicing is smooth and up to date:
1. Send Terms and Conditions Beforehand
You can get ahead of the invoicing game before you even start work on an order, by including a copy of your terms and conditions with the initial email agreeing to supply. A good set of T&Cs is a document every business should have, as it is incredibly useful: it sets out the timescale for delivery, manages clients’ expectations as well as providing them with reassurance, and of course makes clear your payment terms. This means that when you invoice a customer, your payment timescale will not come as a surprise.
2. Make your Invoices Clear and Simple
A good invoice needs to state clearly what it is for, as well as when and how payment is to be made. You should itemise the various goods or chargeable services delivered, show a clear total cost, and state terms of payment. Additionally, a good invoice will include your company’s address and ABN details, as well as the client’s. There should be no surprise or hidden charges on an invoice – that is not good business practice, especially as most B2B suppliers depend on repeat trade. Charge what you need to charge for your services, and be up-front and clear about it.
3. Don’t Delay!
The biggest invoicing mistake made by business owners is to delay sending their invoices. This not only means you will have to wait longer for payment – perhaps a lot longer if you miss a month end payment run – but also increases the risk that invoices get forgotten about and not sent at all. That really would be the ultimate business mistake, but it has been known to happen. Instead, be organised about your invoicing, even (especially) if you aren’t particularly well organised the rest of the time: prepare all invoices in plenty of time so that they either go out as an order is dispatched, or on the last working day of the month if you are billing monthly.
4. Automate Invoice Tracking
After sending out an invoice, it is crucial that you don’t forget about it. You don’t want to hold all that information in your head as you have better things to think about when running a business, so invest in some form of automation. Many invoicing systems are available now at a modest cost, and the better ones will also send out polite reminders just before an invoice is due, as well as flagging those that become overdue.
5. Be Polite – and Keep Selling
It is a fact of business life that sometimes you will have to chase a client for an invoice that hasn’t been paid. The key here is to be prompt, persistent and polite: send a friendly reminder as soon as the date has lapsed, and be prepared to follow it up with a personal note to your counterparts. This is a good opportunity to ask if there is anything further you can do for the client, is there any dispute or was there anything that they were unhappy with that they have not paid on time etc – build the relationship and include any current offers, because people will appreciate that you were fair but firm and likely to want to continue doing business with you.