Find out why your invoice is leading to a loss in customer retention. These five severe invoicing mistakes are very common but they’re easy to fix.
Money may make the world go round, but invoicing is what keeps it spinning.
Invoicing correctly is a critical part of the success of any business. It’s how you get paid and how you ensure your business continues to bring in money. Without a proper invoicing system in place, you’ll most likely find that you’re consistently chasing payments, always looking for spare cash, and are unable to forecast what your business will look like in the future.
Despite the fact that invoicing is such a vital part of every single business, it might surprise you to find that many managers or business owners don’t pay that much attention to it. They see it as an admin task that needs doing, but that often gets pushed aside for more “important” tasks.
This leads to a host of mistakes that are surprisingly common and severely detrimental to your business. Any one of these mistakes can make you look unprofessional and go a long way toward turning clients away from your business.
If you’re making these invoicing mistakes, now is the time to recognize them and make a change:
Every invoice must have payment terms with a due date stipulated. This date should always be clearly spelt out in a way that’s impossible to miss. Without a due date, you have no recourse when a client doesn’t pay you because there is no expectation set ahead of time.
The client can promise to pay for months or years, and you won’t have a legal leg to stand on. You also can’t charge clients late fees or penalties if there is no due date on the invoice.
The best way to avoid this mistake is to set up an invoice template with a clear due date field. You should also have set time periods when you expect all clients to pay you. This can be within one week, ten days, 30 days, 90 days—whatever works for your business and the type of sales you make.
You should also have the payment period in your payment terms on your invoice. Once you have this set in stone for your business, it’s much harder to forget to add that information to your invoices.
Speaking of payment terms, this is another area where people regularly make mistakes on their invoices. They simply leave these out or leave enough wiggle room for clients to ignore due dates or make payments when they please.
It’s vital to include your payment policy, refund policy, and anything else that can get you in legal hot water with clients.
Take the time to write out the fine print of your payment policy and then ensure that it’s saved as part of your invoice template or in your invoicing system. This way, it’ll always be included when you send an invoice, and no client can claim these points weren’t covered.
It’s important to include the payment cycle—how long before you start charging late fees or penalties, as well as if there is any discount for early settlement. You also need to include your policy on returns and refunds, specifically the deadline for such events and what qualifies for such an event. Other things to include could be the currency you accept if you have international clients, as well as acceptable methods of payment.
Nothing upsets a client more than hidden costs that weren’t clearly explained upfront.
If a client suddenly receives an invoice with line items that they don’t feel they agreed to or didn’t know about ahead of time, they are not going to feel inclined to pay that invoice. Especially not in full.
When quoting on a job or product, or providing the product or service, make sure you explain exactly what the client is going to get billed for. Don’t give them any surprises in their invoice, or at the very least, explain why there is an extra charge in great detail.
You need to have the ability to keep track of all your invoices so that you know how much money should come in each month. You simply cannot supply a client with an invoice and not keep a copy for yourself. You have no recourse for non-payment, if that’s the case.
In the old days, carbon copy invoice books created one invoice for the client and a copy that remained in the book. Today, this really should get done in a more effective, digital way.
Paper invoicing systems leave too much room for error and it’s too easy to misplace your copy of the invoice. Even if you use Excel, Google Sheets, or Word invoice templates, keeping a digital copy of your invoice makes it a lot easier to stay on top of your finances. What’s even better is an invoicing system that automatically stores your invoices for you and collates them into easy-to-view lists.
The biggest and most severe of all the mistakes you can make with invoicing is just forgetting to send them out in the first place. Very few people will pay you on time if they haven’t received their invoice for their goods or services. Even if they know there’s a penalty for late payment they will hold off as they can say they never received the invoice.
Never just assume that payments will get made, especially without the necessary paperwork. It’s your responsibility to ensure you send the relevant information to the client, on time.
The best way to prevent this kind of mistake is to create a schedule for yourself that fits in with your accountant or accounting process. Workout what is best for the way you operate—every Friday check to see what projects were completed and send out those invoices without fail, once a month you send out your recurring invoices on a specific date, and so on. With a proper schedule, you won’t forget about sending your invoices.
As you can see, the simplest invoicing mistakes can lead to major issues for any business. Use these tips to stop making mistakes that can cost you clients, and you’ll see the difference.