Are These Invoicing Bad Habits Holding Up Your Pay?
Invoicing your customers should be quite a simple process, but it is one area that new small business owners can fall into bad habits that reduce their income. Proper, reliable invoicing practices will help ensure that you get paid on time all the time.
When it comes time to create your own invoice, send it out and follow up with clients, these six common mistakes are what cause new businesses to stumble. Discover what you can do to invoice your customers correctly and develop good habits that help you get paid on time, every time.
Forgetting to send an invoice
The number one deadly sin in invoicing is to forget to send your invoice.
It is so simple, but you’ll never get paid if you never send an invoice! Even if your customers want to pay you, they might not know how much or how to do it. It is also very likely that they forget entirely (deliberately or otherwise) unless you send it to them.
This bad habit is unlikely to be relevant to most business owners. But if you know that you can be a bit scatterbrained, or you are likely to put off sending invoices because you are busy or don’t like doing it, then create an arrangement to help you remember. Even if it’s a little reminder on your phone, you will lose revenue without it.
Not Keeping Track Whether You Were Paid
There are many businesses that do not keep track of whether they were paid or not. Invoices are sent out but then there is no system for managing those invoices. Especially for businesses that send out a lot of invoices, if they are not kept track of then you are likely to have some customers who benefit from, or actually take advantage of, your disorganisation.
Using invoice management software like Cashflow Manager will help even the most forgetful person keep an eye on their invoicing. The software will generate the invoice and send it through to your customer. Whenever you have received payment you can input that into the software, making it easy to see who has not yet paid you. The software then syncs with your business records, removing the need to input data into multiple locations.
Not Following Up with Customers
If your customer isn’t paying up, then you need to follow up with emails and phone calls to keep reminding them that you need paying. It can be an uncomfortable feeling, but if you don’t do it then you are unlikely to be paid. If they keep refusing to pay you, you might need to contact your lawyer and get them to send a letter to the customer.
On the other hand, you don’t want to be too pushy too quickly. People do pay late. Sometimes they forget, sometimes they are waiting for some cash into their business and sometimes you are on the bottom of a pile of businesses waiting to get paid. Nagging them every day can seem desperate and damage the relationship between you and your customer. You need to find that balance where they remember to pay you, without being too annoying. Setting a standard policy or process for following up with late-paying customers can be a good approach to take.
Not Specifying Settlement Terms & Late Fees
If chasing down your customers for payments doesn’t sound like your cup of tea, one of the best ways to maximise your chances of being paid on time is to clearly state your settlement terms.
Settlement terms can generally be standardised across most of your clients. It is best to consider what the standard time frame is for your industry and adopt that. Many industries give their customers 7 days from the completion of project or 7 days from the date the product/service is delivered.
For special clients, you could consider lengthening the time frame to increase goodwill between them and your business. However, if you do not have to do this then it is better to keep it to the standard timeframe to improve your liquidity.
Once you have decided on your settlement terms, they need to be displayed clearly on every invoice you send out. When you create your own invoice, set out the exact deadline for payment and include your policy for late fees.
You are more likely to be paid on time if you have told the customer at the outset what your policy is. They will be more prepared to pay you on time and won’t be surprised by the deadlines you have set.
Not Requesting Down Payment
Requesting a down payment is not going to work for every business. Typically, these are more appropriate for long-term or more expensive projects that require you to have some payment before completion in order to be able to deliver on time and to a high standard.
If your business does fall into this category, then you should not be scared about requesting a down payment. It demonstrates that you know what expenses you will incur during the project, help maintain your small business cash flow while the project is running and will reduce the risk of your business struggling financially during the project. If the customer is reluctant to pay the down payment then do not be afraid to explain why you need it.
Not Labelling Invoices Correctly
The person who you speak to when conducting business is not always going to be the person who pays the bill. When you create your own invoice, make sure that you describe in detail the exact product you delivered or service you performed so that they know exactly what they are paying for and are more likely to pay on time.
Avoiding these common invoicing mistakes is the easiest way to ensure reliable, on time payment from all your customers. Consider automating your invoicing with Cashflow Manager Mobile and linking to your small business accounting software for even easier, more consistent invoicing.