Every business knows what invoicing is, it is one of the most reliable ways to ensure positive cash flow. You may be surprised to hear that a lot of small businesses aren’t invoicing correctly. They may know what invoicing is, but are they doing it correctly? In this post, I will outline some tips to help small businesses invoice correctly.
Set up payment terms
It goes without saying that you need documentation to protect yourself. This isn’t a business license or insurance terms, but a document to outline and protect you when dealing with payment terms. These payment terms will help you invoice correctly as it will avoid customer confusion about when, how and where to pay.
You should include information that addresses the following questions:
- How much time will you allow for customers/client to submit payment?
- How much you charge for late invoices. Percentage or flat fee?
- Why types of payment will you accept? Cash? Credit/Debit? PayPal? Cheque?
By making sure these details are clear for everyone, you’ll be well on your way to invoicing correctly.
You need to outline your terms of service and the price. This is often specific to your customer’s needs. You need to submit a quote, or price, before accepting or a job or transferring a product. That way everyone knows exactly what’s being provided and more importantly, at what price.
This applies to all small businesses, not just those in the services industry. You will require all these details clearly stated in a document that everyone can reference.
There are invoicing templates out there to help you perfect your invoices. You can pick and choose specifics, but make sure you have the essentials. There is also invoicing software available online, which isn’t as complicated as you might think.
All the relevant information is stored online and you can now invoice wherever and whenever you want.
You can also set up recurring invoices, saving you time and energy that you invest elsewhere.
Once invoices have been issued, they should be archived digitally. Then, when they need to be retrieved, to perhaps resolve any queries or for audits, they can be accessed instantly, saving SMEs time and effort.
Don’t forget the detail
Make sure you include all the details on your invoicing. This includes your payment terms, as well as the invoice spec, quantity, unit price, subtotal, VAT, total etc. It cannot be overemphasised how important it is to include these basic invoicing details and your own banking information. If not, your invoices could be held up in your customer’s accounts department.
Construct the invoice in plain English. Don’t include the words: “payment upon receipt” – to you this means that your client should pay the invoice as soon as possible, but for others, it could mean just pay when you can!
You need to state clearly the accepted time scale of payment. Standard terms are usually that payment is made within 30 days, but many businesses are reducing this to 15 days now, especially as invoices can now be submitted electronically.
Invoices can be late, it’s part and parcel of business, but did you follow-up on late payers, or did you just hope for the best? It is important that you are vigilant in chasing late payers, but do remain professional and send a polite email reminder that the invoice is overdue. Remember, you may want repeat business from this customer, so stay assertive yet polite at all times.
Being a small business owner often means that time is precious, but it’s worth making the effort to get your invoicing set up properly. Having a process that helps streamline invoicing can drastically reduce the amount of time you spend collecting your hard-earned money. And that’s got to be great for business!
Andrew Vear is owner of Enterprise Badges