Cash-flow is the bloodstream of a business and having a proper invoicing process helps you stay afloat. Although simple, this step is essential to maintain excellent financial indicators that could help you get a loan or get discounts from your vendors by paying your bills on time. Late cashing can translate to delays of your obligations. These include installment, utilities and even ensuring a flow of raw materials.
The invoicing mistakes are more common for new businesses. They get caught up in lead generation, marketing, and pitching to clients and forget to ask for payment in due time. Once a company is established, this process becomes routine. It’s a good idea to keep it tightly connected to your production cycle and the payment cycles of your clients. The rule of thumb is to never run on an empty account. Spread out payments to ensure a minimum of cash available at any moment.
No clear terms and conditions
The first category of invoicing mistakes relies on good faith and a firm belief in “gentlemen’s agreement” practices. The harsh reality is that you should state clear payment terms, enforce late payment fees and offer small incentives to clients who pay as soon as they get the invoice. To be fair on your end, you should disclose all fees right from the beginning and provide a clear itemization of the products and services. Put a contract in place and reiterate the payment terms on the invoice. It’s best to specify a date, not use vague terms like “upon receipt” or “net 30“.
Being lazy and missing a process
When you are running a business, you have hundreds of problems to take care of. That is why invoicing should be automated, delegated or on top of your priority list. You can even send the invoice as soon as you start working on the specific project or when you deliver the goods or end the service. Never wait for your client to ask for it, or you will look unprofessional. Pay attention who are you sending the invoice to and double-check account details. Be sure to end your invoicing process with a backup of the invoice in a cloud storage system to avoid any local accidents and data loss.
Not using this as a marketing opportunity
Every contact with your client is another opportunity to reinforce your brand. The simplest way to do this is to add a logo to your invoice, positioning yourself as a trustworthy company. Next, spice things up and update monthly your invoice with your offers and promotions. If you are sending a hard-copy, don’t ignore the advertising space on the back of the invoice. Last but not least, don’t forget your manners. A simple “Thank you for your business!” can generate more.
Not offering payment safety and flexibility
Payment is a pain point in the client’s mind. You should strive to make this process as simple, fast and safe as possible. Ask your client about their preferred payment method and make sure you use it. If it is not possible, try to reach an agreement. For online payments, always make sure you delegate this to a certified third-party processor and never store credit card details.
Invoicing mistakes quiz
We have put together a simple poster to remind you of these common mistakes. Play a game and add one point for each one you plead “guilty” to. Add the points and think about your score:
- 1-3 points – You can do some minor improvements to wow your clients.
- 4-7 points – You are losing money or credibility. Did you think about outsourcing your invoicing?
- 8-11points- You can get in serious trouble with vendors and the bank.
- 12 points- Are you still in business?
