9 Most Common Mistakes Businesses Make With Their Invoices
Invoices are commercial documents that record a transaction between a business and a customer. The more products or services provided, the more complex the invoice can be. Invoices don’t have to be complicated, but some businesses don’t yet know that their current invoicing methods may not be best practice. If any of these common invoicing mistakes below look familiar, it might be time to make some changes.
Customers Find Them Hard to Follow
If you continually field phone calls from customers trying to understand the details on their invoices, you may not be making them easy enough to read. This can be an issue with invoices you’ve created yourself rather than by following an invoice template.
When you aren’t familiar with the best layout of an invoice, you may not be able to provide the most convenient service for your customers. Some invoice templates you find online have been tried and tested layout methods for decades, which means you may find some value in following a pre-set order of information rather than coming up with your own.
You Don’t Send Your Invoices Out Quickly
With so many convenient accounting software programs in existence, there’s simply no excuse to delay sending an invoice. As soon as a job is complete, an invoice can go with it to be fresh in the customer’s mind.
If you wait too long to send out an invoice, you may encounter two serious problems. Your cash flow may suffer, but you may also see delayed payment by customers who have long since forgotten they even owned any money. Get into the habit of sending invoices on a set day each month or as soon as you complete a job. You may then be able to solve both of those aforementioned problems with ease.
Requesting Extra Money
The world of quotes and estimates can be complicated. An estimate is a guide of how much something might cost, while a quote tends to be a more accurate representation. Don’t mix up the two, and make sure your client knows which one you are giving them.
Many businesses have found themselves in hot water with customers over unexpected or surprise costs. If something will cost more than you told them, talk to them about it, rather than surprising them with it on an invoice.
Not Including a Due Date
Most businesses would like to be paid for their products and services as soon as possible. However, if you don’t specify a date on your invoice, you may struggle to make some of your customers pay.
A due date can be paramount for making more accurate cash flow projections while also ensuring you have the legal standing to chase money owed to you.
You can set a due date that works the best for you, such as a week, a fortnight, or a month. Out of all ways to speed up invoice payments, adding a due date would have to be one of the most effective.
Not Keeping Records
All financial records for your business must be kept for a period of 6-7 years. Doing so makes it easier for you to claim losses from bad debt or worthless securities. If you don’t keep records in that period, you may not be abiding by the IRS’s recommendations. You might also struggle to prove your business income deductions if you need to.
Fortunately, keeping records of your invoices and other financial documents is easy when you rely on accounting software and accounting specialists.
Adding Incorrect Information
We all make mistakes, but making them on invoices can lead to many problems in the business world. For example, if you send an invoice to the wrong customer, they may just ignore it rather than letting you know your error.
If you add the wrong name to an invoice, the recipient may presume it’s not for them or might even think many other parts of the invoice are also incorrect. Some might not even open your email at all.
Even if you’re in a hurry to send out as many invoices as possible before the end of the month, take a moment to check for errors. Pay attention to who it’s for, the amount, and the due date. This one small job may save you many problems.
Not Breaking Down the Costs
Seeing one large figure in an invoice can be much harder for customers to accept if they aren’t sure what contributes to it. Always break down the costs associated with the final figure, so customers can find out where their money is going.
For example, if you were a plumber charging $1,000 to fix a leaking pipe, that might seem excessive to some. However, if you itemized the charges into call-out fees, after-hours fees, parts, and labor, your customer can see exactly what they’re paying for.
Itemizing invoices also allows customers to track expenses and verify payments much easier than if you simply put ‘plumbing, $1,000’ on the invoice.
Making It Hard to Pay
We are in an age of convenience, with everything being available at the touch of a button or a click of a mouse. We want to make bill payments with as much ease as we would shop online.
If you create digital invoices, explore your options around digital payments. The more payment options you offer on your invoice, the faster you may receive payments. Consider fast and convenient options like bank transfer, credit card, and PayPal.
Not Having Clear Payment Terms
Look at the last invoice you received, and you may see some text at the bottom labeled ‘invoice payment terms.’ The information within these terms can be crucial for making sure your customer is aware of your expectations.
Typically, these terms outline the accepted forms of payment, your currency type, and any late payment penalties if you charge them. The clearer your payment terms are, the easier you may find it to receive payment in a timely fashion.
Invoices don’t have to be complicated. They can, and often are, straightforward and easy to follow. However, it can take some research to get them to this point. If you’re new to the world of invoicing, look at template options online, read about the best payment terms to include, and find out how to make sure your customers can pay with ease. You may then enjoy fast payment with few hassles.