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.