Business and Marketing

Invoicing Mistakes That Could Undermine Your Bottom Line

Prompt and professional invoicing not only assures the health of your business’s bottom line but, if done right, is also a significant interaction with your clients. 

But the process does have its challenges and potential pitfalls that cost your business in the short and long term, so it is vital to be aware of these and avoid them. Some of these potential pitfalls could put pressure on your cash flows, while others damage the prospect of doing more business with the customers.

Mistakes Than Can Ne Costly For Your Cash Flows

The mistake many businesses make is not sending their invoices timeously. Often late invoicing happens because you are too busy generating new business or don’t have the necessary procedures in place to ensure the invoicing process is a smooth one.

Falling into the trap of sending invoices after you have completed the job means it will take that much longer to get paid, directly impacting your cash flows.

When should you invoice your customers? A best practice is sending it soon after you have completed the work. If you have negotiated an upfront deposit, you should send the invoice as soon as the quote is accepted. Otherwise, it would be best if you processed the invoice as soon as your client has indicated you have completed the job to their satisfaction.

Sending the invoice soon after completing the work also ensures that the service you have offered the customer is fresh in their minds, along with the value you have added to their business. Your professionalism will also hold you in good stead when the customer has additional work.

Not knowing the right department and person that will be processing your invoice is also a mistake that could cause avoidable delays and put a dent in your bottom line. It’s worthwhile doing your homework upfront to find out who will be signing off on your invoice and making payment. Get their correct contact details so that you can be sure they are getting the invoice directly from you. Securing the information you need will speed up the process and result in you getting paid as early as possible to the benefit of your cash flows.

Invoices that don’t contain all the company’s required information could also result in costly delays. Every company has specific information that needs to appear on the invoice for it to meet its invoicing requirements.

What should those be? At a minimum, these include the company details, physical address, name of the person who gave you the work, an invoice number and an invoice date. Other information to add where needed is a due date for payment, relevant tax numbers and payment terms. It is advisable to find out the exact details required before you send the invoice to avoid the invoice being sent back to you for revision.

Not itemising services correctly and in line with those you committed to delivering can result in time-consuming queries from the customer. Even worse, it could cause disputes over whether the services you delivered line up with the contracted work.

Another pitfall is not being clear on the terms of payment upfront. If you don’t specify how and when the customer should pay, you cannot expect payment within the time-period you envisaged. 

To ensure payment on your terms, it is crucial to be transparent and specific about your expectations when you first negotiate the contract. It is also worth reminding customers of the terms on all subsequent communications around the payment.

It is preferable to offer your customer a variety of ways to make a payment, including credit cards, electronic fund transfers and PayPal.When payment methods are difficult for the customer, it puts additional and unnecessary hurdles in the way of prompt payment.

Invoicing Mistakes That Can Affect Your Ongoing Success

Invoicing has the potential to build or dent your company image. Any behaviour that conveys a lack of professionalism will undermine your reputation as a business offering quality services. Mistakes you want to avoid at all costs include sending an invoice that looks tardy, making spelling mistakes or providing inaccurate information.

Another mistake to avoid is adding unanticipated costs that you did not agree on with the customer. It is advisable to inform your customer as soon as you envisage your services will cost more, otherwise these extra fees could damage your reputation and reduce the likelihood of you getting further work from the customer.

As a small or medium enterprise, getting the invoice invoicing process right is much more critical than it is for an established business because it can materially impact your cash flows, as well as your customer relationships. So put in the effort upfront because invoicing plays a crucial role your business growth potential.

Read More:
E-Invoicing Standards and How these are Influencing the Adoption

Business and Marketing

E-invoicing Standards and How these are Influencing the Adoption

Concerns about the technicalities and time involved in getting a digital invoicing system up and running have resulted in relatively slow adoption of e-invoicing by Australian companies. However, several recent government developments should increase the pace of e-invoicing adoption.

For the past few years, the Australian government and tax authorities have been working towards introducing a common e-invoicing framework across Australia and New Zealand. This was achieved in February 2019, when both countries announced that they would adopt the Pan-European Public Procurement On-Line (Peppol) interoperability framework, a standard used by 34 other countries internationally.

Introducing a global e-invoicing framework creates an environment in which more businesses will see the benefits of relying on the automated transmission of e-invoices between the buyer and the supplier rather than sending paper or pdf-based invoices.

More recently, the announcement of another important government initiative is also likely to fast track the adoption of e-invoicing by government suppliers. In early November, the Australian government committed to rolling out five-day payment terms for suppliers submitting e-invoices of less than $1 million. The new payment terms will come into effect on January 1, 2020.

The Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, considers the government’s new e-invoicing payment terms to be a game-changer for small businesses that have contracts with a federal government agency. She says the next step will be to apply this to businesses throughout the supply chain in both the government and private sector.

E-invoicing promises to be particularly beneficial for small businesses that rely on healthy cash flows to sustain their momentum and grow. The digital sharing of invoices between supplier and customer speeds up the process of invoicing, eliminates processing errors and reduces processing time. It also allows small businesses to monitor and follow up on invoices more effectively.

According to the Australian Small Business and Family Enterprise Ombudsman, about 20% of traditional invoices are sent to the wrong person, and about 30% contain incorrect information, which results in delayed payments. Late payments are also an issue for small businesses. Ombudsman Kate Carnell says, “Our Small Business Counts report shows that late payments continue to hamper small business viability, with half of all small businesses reporting late payments on 40% of their invoices.”

Although there are definite advantages to e-invoices, adoption has been hampered by the technical changes that companies must make to their accounts receivables process and software, as well as the perceived financial cost and effort of moving over to an electronic invoicing process.

The Australian Tax Office has been a significant force behind ongoing efforts to encourage the shift from paper or pdf-based invoices to e-invoices and has been doing so since 2016. The revenue authority also viewse-invoicing as a more efficient method because it reduces the number of invoices being lost or delayed because of their direct and automatic transmissions between the software systems of the buyer and the supplier.

At the end of October this year, the ATO was registered as the Australian Pan-European Public Procurement On-Line (Peppol) Authority, responsible for replicating the internationally established, collaborative e-invoicing framework across Australia and New Zealand that was announced earlier in the year.

There is no doubt that companies and the broader Australian economy have a lot to gain from shifting over to e-invoicing that aligns with the Peppol standard. The Australian Small Business and Family Enterprise Ombudsman says research shows the difference in the cost of processing a paper invoice, estimated to be about $30, and an e-invoice, about $9, is significant and would result in much-needed savings for small companies in particular. With nearly 1.2 billion invoices exchanged a year in Australia, the potential economic benefit amounts to $28 billion over a decade if all businesses switch to e-invoicing.

There is little doubt that government efforts to put in place a common e-invoicing standard that makes digital invoicing much more accessible and easier to navigate will pay dividends as companies see the benefits of moving away from paper and to digitising their accounts receivables process.