Common Invoicing Mistakes Every Business in the Philippines Should Avoid

We all know that invoicing is essential when you’re running a business in the Philippines. For one, a strong invoicing process makes sure you get paid on time by your customers. It also creates a record that you can use to reconcile your accounts, ready for tax season. 

But between connecting with your customers and growing your brand, it’s easy for invoicing to become an afterthought. This can lead to simple invoicing mistakes that disrupt your cash flow and make it trickier to comply with tax regulations. 

With that in mind, we’ve put together a list of seven invoicing mistakes that businesses in the Philippines commonly make, as well as tips to avoid them and how to handle an error when it happens.

1. Not including the correct details on your invoice

Getting details incorrect on your invoices can lead to delayed payments and customer disputes, which can harm your reputation as a business. It also makes complying with tax laws more challenging.

With Bureau of Internal Revenue (BIR) noncompliance fines ranging from ₱1,000 to ₱50,000, it’s important to get this element correct. The good news is that this invoicing mistake is easy to avoid once you understand everything to include.

The BIR requires that every invoice contains the following information:

• The seller’s information, including their registered name as shown in BIR COR, as well as their VAT registration statement, TIN, and business address. 
• Identifying information, like the date of transaction and the invoice serial number. 
• Details of the transaction, including quantity ordered, unit cost, and a description of the goods or services provided. 
• The total sale amount, VAT inclusive, with a breakdown of VAT exemptions and discounts, where applicable.
• VAT amount shown separately, if applicable, with a breakdown of VATable sales and VAT amount, as well as any VAT-exempt sales. 
• The word “invoice” printed at the top of the document to make it clear the document is an invoice. 
• Any other transaction-specific information, such as whether the payee is entitled to tax relief. 

Made an error? Remember not to override or delete an invoice as this can lead to noncompliance penalties. Either issue a credit or debit note or cancel the invoice if the error is significant, but keep the original invoice on record for tax audits. 

2. Failing to set clear payment terms

Clear payment terms make sure your payee knows exactly what they need to do to pay your business. Without them, your customers might interpret your policies the wrong way, which can lead to delays and disagreements. 

At the most basic level, your invoice should tell your payee:

• How long they have to pay the invoice
• Where they need to send the money
• The ways they can pay (such as bank transfers and online methods) 
• If there are any penalties or interest rates for late payment 
• How your refund policy works 

Try to lay out your payment terms in an easy-to-understand way. Many common invoicing mistakes happen because of simple misunderstandings.

For instance, if a sari-sari business specifies that “refunds are available within 30 days of purchase”, does this mean the customer has 30 days from the initial order date, or does the clause activate only once they receive the invoice? 

By removing confusion you can make sure there’s no room for interpretation within your payment terms and policies. This can help you avoid delays and, in the worst case scenario, complex legal disputes. 

3. Sending invoices too late or too early

The unified local business culture in the Philippines means invoicing timelines are often flexible rather than fixed. Many businesses will delay sending invoices because of the preference to build warm relationships rather than following strict schedules. 

However, these delays can lead to bottlenecks that make it harder to keep up with short-term costs. It could also cause your client to deprioritize paying you once your agreement goes to the back of their mind. 

On the other hand, sending an invoice too quickly can be frustrating for your customers. That’s especially true if they haven’t had a chance to review the goods or services provided.

To avoid this, send an invoice around 1-2 weeks after you deliver the product or service. This means you can maintain a healthy cash flow and demonstrate your credibility. It also makes sure your customer has the time to receive and test their order. 

4. Overlooking backup and recordkeeping

Accurate recordkeeping is easy to overlook—especially once a deal is closed. However, keeping your invoices categorized is incredibly important. 

The BIR requires that Filipino businesses maintain their invoices on record for at least three years. That increases to a maximum of 10 years if the records are needed for tax audits or any other investigations currently in progress. 

You should keep hold of all of your invoices so that you’re prepared for tax time. Also make sure these invoices are accurate and correctly labelled so they’re easy to find when you need them. 

Hard copies are one option, but paper can sometimes end up on the ‘to shred’ pile accidentally. Instead, it’s a good idea to store your records on digital invoicing software that can categorize and store your invoices on your behalf. 

As well as giving you reliable access to your invoices whenever you need them, digital invoicing software will also classify and archive your records automatically. This lets you save time while making sure you’re ready for a BIR audit when required. 

5. Missing late fees or penalties

Forgetting to include late payment fees can seem like a small mistake on an invoice. It can, however, have a ripple effect that makes it harder for you to meet your own financial needs when multiple customers delay payment at the same time.

Late fees for overdue invoices will incentivize your customers to pay you in full, on time. This also gives you a way to take action if a payee doesn’t send you what they owe. 

As ever, it’s important to lay out your late payment penalties clearly so there’s no room for conflict. You can pursue overdue invoices for up to six years before the claim is no longer valid in the Philippines. But know you can’t charge a late fee unless you specify it clearly in your invoice. 

You can also decide to send out reminders when you’re getting near to the payment deadline—this displays your professionalism while also showing customers you’re looking out for them.

6. Using outdated or unprofessional invoice templates

Sending out low-quality invoice templates is one of the most overlooked invoicing errors. This won’t land you in any hot water during tax time, but it can harm your reputation—especially because of how highly valued brand professionalism is. 

We suggest having a consistent and professional invoice template that you send to every customer. You can increase credibility by incorporating your logo and brand colors—just make sure this doesn’t make the essential details hard to read. 

Don’t know where to start? Try our free invoice template if you’d like to create a professional invoice as a small business or freelancer.

7. Hidden charges or fees

Businesses in the Philippines value transparency, and including hidden charges in your invoice can damage your reputation and lose client trust. It also makes it more likely they’ll refuse to pay. No one likes to be billed for something they weren’t expecting, after all. 

Sometimes you’ll need to include an additional fee that you didn’t provide in your quote, like when a project takes longer than expected. 

This is okay, but you should always communicate with your customer to explain the extra fee before you send the final invoice. This avoids nasty surprises that can lead to frustration.

How to handle an invoicing mistake: Apologizing and correcting the issue

Even the most organized business makes occasional invoicing errors. It’s okay to make a mistake! What’s important is knowing how to correct the issue. 

Take these steps if you notice a problem:

1. Address it proactively: Don’t wait for your client to come to you. Reach out to them and apologize promptly if you notice an issue.
2. Document the error: Annotate the invoice to indicate that it contains a mistake so that you have a record of the error for compliance purposes.
3. Address the issue: You might be able to amend the mistake if the error isn’t serious, or you may need to issue a new invoice entirely. A credit or debit note is a valid option to reimburse the payee in cases where the mistaken invoice has been recorded—this will keep your books in line. 
4. Adjust your records: Change your accounting records to reflect the correction in line with the BIR rules. This is especially important if your invoice is part of VAT reporting. 
5. Retain the old invoice: Always keep a record of the original invoice for tax purposes. 

Above all, remember to document the whole process and keep a copy of the original invoice in your bookkeeping software. Doing so will ensure there’s a clear audit trail to avoid noncompliance. 

How to email a client regarding invoice mistakes

Emails are a good place to start when you need to apologize for an invoice mistake. They alleviate any confusion and make sure the customer understands the situation. 

Start with a sincere apology. You can then explain the nature of the error and how you’re working to address the issue. Also attach any relevant documents, such as a new invoice or a credit note. 

Be professional but reassuring. Offer apologies, but also provide a solution immediately to lessen the impact of the problem and strengthen client relationships. 

As for timing, it’s best to send an email as soon as you notice the issue. Reaching out to correct a mistake promptly shows you’re proactive and professional.

5 best practices to avoid invoicing mistakes

Let’s round things off with five tips to avoid invoicing errors in the Philippines:

Use a standardized template

Rely on a single invoice template to keep your formatting consistent. This will also make your business look more professional. 

Implement an invoicing system or software

Use invoice software to automate time-consuming tasks, like calculating VAT and inputting customer information. This eliminates the possibility of human error, as well as saving you time.

Set clear payment terms in advance

Discuss payment terms like late fees with your customer before you send out your invoice. This will avoid any surprises that could lead to your client avoiding or disputing payment.

Double-check details before sending

Check all of the details line up with the information you have on file—even if you’re using an invoice automation software. It’s always good to be cautious. 

Keep a backup of all invoices

Keep digital and paper records of all of your invoices, even the ones you no longer need, to avoid issues with BIR compliance.

The importance of avoiding invoicing mistakes for business growth in the Philippines

Avoiding common invoicing mistakes will make you appear more professional and save time, while also keeping you compliant with the BIR. It’s worth taking the time to make sure everything is in order. 

Finding it a challenge to keep your books in line while avoiding invoice mistakes? QuickBooks can help if you’d like some extra support.

Our invoicing software will handle invoice calculations, such as VAT, automatically. It’ll also send out invoice reminders automatically so you never miss a payment, as well as categorize all of your records so you’re fully prepared for tax time. All of this helps you save time and avoid costly errors. 

Try a free 30-day trial today if you’d like to try out the features for yourself.