2015-09-01 09:19:13Getting PaidEnglishStudies show that 16% of invoices never get paid. Learn what's wrong with your invoices and what you can do to make sure they get paid on...https://quickbooks.intuit.com/r/us_qrc/uploads/2015/09/These-4-Invoice-Mistakes-Could-Break-Your-Business_featured.jpghttps://quickbooks.intuit.com/r/getting-paid/infographic-whats-wrong-with-your-invoices/What’s Wrong With Your Invoices?

Getting Paid On Time

What’s Wrong With Your Invoices?

To many small business owners, accounting may look like jargon, spreadsheet, and numbers.

As you gain more experience collecting payment from customers, however, what you’ll realize is that getting paid is an art.

No matter how smooth your processes are, whether you work with an accountant, and what steps you take to stay organize, you can’t control your customers.

Just imagine the complexities that are happening behind the scenes:

  • In order for you to get paid, your customer needs to get paid
  • Your customer may be on a different budget cycle and calendar year for your business
  • Your customer likely needs approvals to cut a check and pay you
  • Your check could get lost in the mail
  • Your customer, especially in a complex industry, may be bound by certain laws that govern exactly how they can transfer funds to you
  • Your check could get lost in the mail
  • Your customer may not know how to process an invoice

Not to mention, our attention spans are spread thin.

Your customer may forget to submit a payment for processing, which could result in delays that span months. One or two delays may not hurt your business in the short term , but what happens if multiple customers lapse at the same time?

The best way to outsmart this rut is to avoid it altogether. A few subtle changes to your invoicing process can prevent administrative challenges before they have a chance to surface. Here are 4 common invoicing mistakes that business owners should take active steps to avoid:

1. Forgetting Logistical Details

Don’t make your invoice difficult to pay.

Ensure that all details are visible, easy to read, and straightforward to digest. Give your customers a clear set of instructions to follow, to make the process of making a payment easy. Your customer may have follow-up questions, need information to process a payment, or have questions about remittance instructions. You can save time and unnecessary back and forth by including the details that your customers need, off the bat. At a minimum, your invoices need to include:

  • Your company information
  • Header
  • date, invoice number, and unique identifier
  • An itemized list of goods and services.

Depending on your customer and industry, you may need to include a PO number and/or itemized list of billing codes.

Get paid 2x faster with Smart Invoices by QuickBooks

If you’re not sure where or how to include, format, or structure these details, take a look at this comprehensive guide to creating invoices.

You can also use this free invoice generator or sign up for an account to use QuickBooks Online. If you’re not sure which details to include on your invoice (i.e. whether you need a PO number or billing codes), reach out to your customer’s accounting team and ask.

2. Under-Communicating with Your Customer’s Finance Team

Your end-customer is likely not the person responsible for paying your bills.

Especially if you do business with other businesses, your point of contact likely has another point of contact on an accounting team.

The process of transferring money—and establishing a transaction record—may end up turning into a complex game of telephone, in which details fall through the cracks.

Don’t let this happen.

Instead, make sure that you get the name and contact information for your customer’s billing contact. Make sure that this individual receives a copy of each and every invoice. That way, if you have a question about the status of your payment, you can reach out to your billing contact directly, rather asking your customer to follow up on your behalf.

If your business’s customers are consumers rather than fellow businesses, ask to include a backup contact on each of your invoices. That way, you’ll have multiple sets of eyes monitoring the status of your payment.

Once a month, plan to follow-up on outstanding invoice questions. Ask your billing contact for an estimated payment date, so you anticipate when funds will arrive.

If a due date is approaching, be sure to send a reminder in advance. Take care of the administrative leg work, so that you can focus your customer conversations on the products and services that you’re delivering.

3. Not Automating Finance Workflows

Many businesses rely on spreadsheets and paper-based processes to manage their financials. These workflows are time-consuming and error-prone.

Let’s say that your customer sends you a check that gets lost in the mail. In addition to resolving the lapsed payment, you’ll also need to create relevant documentation within your accounting software. With this documentation, you might mislog an important piece of information. Repeat your mistakes a dozen times, and you’ll end up wasting time on preventable business fire drills.

An easy, low-hanging solution is to use accounting software. For instance, QuickBooks Online customers can set up workflows for accepting electronic checks, automating billing, and depositing funds into bank accounts. Your software creates a paper trail of all transactions, which you would have otherwise needed a human to do. You minimize administrative hiccups and make the payments process easier for your customers, as a result. You can set up automatic withdrawals, on a mutually agreed upon date, to ensure that transactions don’t fall through the cracks.

4. Not Having a Backup Plan

What happens if your customer fails to pay an invoice on time and then leaves to go on vacation for a month? In the event of a delay like this, it’s important to have backup options to keep your business stable. Especially if you have a monthly payroll to maintain, you need to be able to access the funds that you are owed quickly.

That’s why, even if your cash-based financials are healthy, your business needs to establish lines of credit. Some combination of an invoice financing line, line of credit, and credit cards can give you access to cash during an unexpected liquidity crunch. For more guidance on establishing lines of credit and gaining access to invoice factoring, take a look at the following guides:

Final Thoughts

Admin is one of the most important yet overlooked aspects of a small business. Don’t let a preventable error wreak havoc on your cash flow. Prevent problems before they have a chance to fizzle into your core operations. Be detailed with your invoicing process, maintain strong lines of communications with your customers’ accounting operations, automate your accounting workflows, and create a safety net for your business through lines of credit.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.