Invoicing Process Best Practices

Invoicing Process Best Practices

As a small business, invoicing is how you get paid, and the better your invoicing process is, the better your business will run. Slow payments make cash flow tight for your business, and, unfortunately, we all know some clients don’t like paying their bills at all. The right process and the best practices will help you improve the speed that you receive payments and improve the likelihood your clients will pay you.

A Well-oiled Machine

Having a dedicated bookkeeper or invoicing software is pivotal when taking on the giant task of billing customers. Invoicing software makes it much easier for you to maintain and send all of your invoices as well as track any outstanding invoices that need to be collected on. A great option to get your feet wet with is Paypal, an invoicing service that offers unlimited invoicing. You only pay a small fee once your customer has paid you. Trying this service out may give you the opportunity to see if your small business is ready for a full-scale program such as Quickbooks or Zoho Invoice.

A full invoicing system can also serve double-duty for other best practices like updating customer information, tracking inventory or processing payroll depending on the type of software you choose.

In addition to invoicing software, you may want to hire a bookkeeper who can keep track, organize and pursue invoices. Even if this person is only part-time, he or she can keep the process clean, swift and organized so you can focus on the primary business. If you’re doing a good bit of business, invoicing and your other accounting duties can take up a lot of time. He or she can also easily and quickly answer customer questions since they consistently work with your books.

If hiring someone isn’t in your budget at the moment – we know entrepreneurs have to wear many hats in the startup phase – investing in a solid software option is a must to keep you sane and organized.

Stay up to Date and Communicate

If you want to get paid, you need to make sure you are able to keep up with your customers.  This means constantly updating phone numbers, addresses or the names of changing staff. Obviously, it’s difficult for a customer to pay you when the bill is showing up at an address they are no longer located at.  Ask your customers from time to time if the information you have for them is correct.

It may also be in your best interest to get to know the accounts payable person for each of your clientele.  Knowing the “checkbook” of each client you work with makes it much easier to track down or follow up on payments later.  Also, you can include this specific person’s name on the invoice to ensure the bill is making it directly to their desk and not the general company mail pile.

As always, communication is key and figuring out how best to communicate your payment needs is a big part of getting paid quickly. Some companies may need you to make some friendly calls to remind them about their payment. Others will pay more promptly when you include the right contact’s name on the invoice.

You must also stay “up to date” on popular payment and delivery options. We live in a digital age so it is likely that the majority of your customers will choose to receive and pay their bill virtually.  Try to make sure you have a digital payment option so you can contact and receive payment from the customer in the most convenient method for them. The more convenient it is for them to pay you, the more quickly you will receive your money.

In the past, many companies have only accepted cash, check or money order.  Now it is the norm to accept some sort of credit card option and many companies are now even accepting Paypal or Venmo payments since they know this is a convenient way for customers to pay.  In some extreme cases, companies even accept bitcointo have invoices paid.

In addition, bills are being sent any number of different ways.  Mailed bills are quickly becoming a thing of the past as more and more consumers choose bills by email or even text message. Having these options available can help your customers pay quickly and easily, making your cash flow more stable. Be sure to stay on top of the latest trends in billing and payments. Add these to your own invoice options.

Customer Service Doesn’t Stop at the Door

You may think that, once services are rendered, you no longer have to worry about customer service. This just simply isn’t true. Customer service activities should extend to your invoice practices as well.

One easy way to do this is to utilize your invoices to remind your customers you care.  A small note of appreciation or insert of upcoming sales can help make your customers feel truly valued and appreciated. If your business typically utilizes an online invoice to a client one time, it may even be in your best interest to write a thank you note for that extra dose of customer service.

Another way your invoice can extend your customer service actions is to offer flexible due dates.  Sometimes considering when your customers get paid can mean a win for your cash flow. They are more likely to pay you if they have money available to pay you with.  If you primarily work with clients who are paid monthly, such as teachers or the elderly, it will benefit you to set due dates close to the beginning of each month. If your clientele is a large corporation that has to have the invoice payment approved by multiple people, you may want to give this customer a few extra days on their due date.

Your invoices can be used for much more than just balances owed. Ultimately, these small customer service details can help your invoices be paid quickly and maintain relationships with your customers and for these reasons should not be overlooked.

Design Matters

When your customer receives their bill, they are likely looking for how much they owe and when it’s due.  However, including this information alone is not enough to make a well-designed invoice. It is incredibly important that your invoices are well designed, both for your benefit and your customer’s.  The elements you should be sure to include are:

  • Invoice Number– This will allow you to easily keep track of the invoice, especially if you are sending out numerous invoices to the same client. This is normally housed at the top, right-hand side of the invoice.
  • Contact Information– Include your company’s logo, name, address, email and phone number. This ensures your customer knows who the balance is owed to and how to contact or pay you, if need be. Of course, you will also have the client’s name and address listed for mailing purposes but you may want an additional area that includes their email address and phone number as well so that they can update these additional pieces of information for you if something has changed.
  • Due Date and Balance– The due date and due balance are the bread and butter of invoices so you want to be sure they are included and quite prominent. At the top of your invoice, and likely in bold, large font, you will want to include the due date and total balance that is due. This, of course, tells your customer the latest date they can pay the balance. In the same accord, the due date helps you keep track of when you will need to move to the next collection action if the customer doesn’t pay. The biggest thing to keep in mind with this part of your invoice is that these two pieces of information are the most eye-catching.
  • Balance Breakdown– Towards the middle of the document you will want to have a balance breakdown so the customer has a full understanding of what their balance includes. This may include separate prices for individual parts and a line item for labor that all add up to the invoice’s grand total. This same portion will also have a breakdown of any taxes or additional fees, such as membership or late payment charges. This portion of the invoice will be helpful to you in case the customer questions their charges. With this, you now have a specific record of what you charged the customer for and how the total balance adds up.
  • Payment Options– Finally, you will want to make sure your invoice includes all payment options you accept. This should include an address for mailed payments to be sent, a phone number for telephone payments or website addresses for online payment options. You will not only want to list these but also include any other relevant information in relation to payments.  For example, if you use a service that will charge your client a fee to pay with a credit card, make sure to include this information on your invoice along with the amount of the payment fee.

These are your basic invoice elements that help you and the customer keep track of what is owed to whom. If your business is only sending out a few invoices and you are in need of a basic template to start with, there are a number of free options to get you started. Google Sheets offers a basic invoice template as well as Microsoft Excel.  Both these options are free and easy to fill in if you have a basic invoice to send. You can also search “Invoice Generator,” which can take you to a number of sites that offer free template designs with additional features for automatically calculating tax, late fee percentages or mail merging.

Be Clear

Don’t let your customers delay their payments simply because they are confused about their due date or how and where to pay.  These bits of information should be clear and prominent on your invoices. This goes back to having a solid invoice design. Be sure your invoices contain a balance, due date, payment options and where to remit payments.  This information should be easy to find, see and read. Use large and simple fonts so anyone, young or old, can find these most important pieces of information.

Also, make sure any policies such as late payment fees or termination of services are spelled out on your invoice so that clients are fully aware of the repercussions if they don’t pay.  This can quicken payment speed and help you avoid angry phone calls from customers who were unaware of your non-payment policies.

Know Your Options (Legally)

Whether you use a bookkeeper, invoicing software or old-school carbon copy ledgers, you need to follow up on unpaid invoices. When your clients’ fall behind on their payments, their inaction interrupts your cash flow and as a result your overall business.  Don’t be afraid to reach out to your non-paying client if you haven’t received payment.

If you mail your invoices, it truly may get lost in the mail, have landed on the wrong person’s desk or have been shuffled under a stack of papers. These are honest mistakes, so don’t assume your client hasn’t paid because they don’t want to can be detrimental to the relationship. Reach out if an invoice falls behind (especially if they are a regularly paying client). Communication is key to figuring out what your client’s situation and maintaining a good relationship with them.

If worse comes to worst and they simply refuse to pay your invoice, be aware of your options legally.  Each state has different laws for what amount can be brought to small claims court as well as how much time must elapse or what actions of contact with the client need to be taken before this can occur.  In general, it is beneficial to be aware of collection laws so you are not harassing clients illegally, such as during bankruptcy.

Ultimately, if you find yourself with a number of outstanding invoices it may be time to consider an option like factoring which will not only take these invoices off your hands but also provide you with a portion of the owed balances immediately.

Following these best practices can help your invoice processes run smoothly and efficiently as well as get you paid a bit quicker in many cases.

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