Invoicing is obviously one the most important tasks for a small business but many people push it to the bottom of the to-do list.
If you rush invoicing or approach it haphazardly, you’ll make mistakes and you could end up with delayed payments, irritated clients and your financial records in a mess.
These are some of the most common invoicing mistakes that small businesses make and some tips on how to avoid them.
Forgetting to send invoices
It seems like the most obvious mistake to avoid but it could occur simply because business is going so well that invoicing has slipped off your to-do-list. However, even if it’s because business is booming, there really is no excuse for forgetting to send an invoice. What’s the point in working so hard if you’re not going to get paid?
Make sure you have a system for sending out invoices on a regular day each week or, preferably, as soon as each task is finished. Some people use the mantra “Kill it and bill it” – get the work completed and get the invoices out.
Not chasing invoices up
While collecting invoices from clients with a poor payment record can be stressful, you’ve got to make sure your invoices aren’t left unpaid.
Make your payment terms clear and if they are breached, be quick to follow up with a polite request for payment. If it looks like it’s going to happen a second time, you should try to ensure it doesn’t by following up just before the payment date. Finally, if the pattern continues, you should consider how much damage it’s doing to your business and whether it’s time to ditch the client.
Accounting software can help you to see at a glance which invoices are overdue and need to be chased up sharpish.
Sending to the wrong client
This one is a bit of a clanger because it could jeopardise your negotiating position and your relationship with clients. By sending an invoice to the wrong client, you could reveal details of cheaper prices you’ve negotiated with other clients or sensitive information about a competitor. Such a mistake could spoil two business relationships.
Once you’ve double-checked the details of the invoice, make sure you also double-check who you’re sending it to.
Not backing up
Even if you’re a sole trader, you must keep records of your business’s income and expenses so saving your invoices is vital. However, what would happen if the computer on which your invoices are saved crashed? At the very least it would mean having to wade through outboxes to collate all the invoices you’ve sent. If invoices were completely lost, however, this could cause you real problems if IRAS ever chose to investigate your business.
Make sure you find a way to ensure all your invoices are backed up, whether that’s using software or another type of secure storage.
Each invoice should be unique so that your records make sense to you and anyone else who needs to understand them, including accountants and IRAS officials. Having two invoices with the same invoice number will cause confusion, so make sure you keep a log of which invoice references have already been sent so you don’t accidentally reuse one – invoicing software can be used to create automatic sequential numbering or you must at the very least keep a manual record.
Have you made any invoicing mistakes you’d urge others to avoid? What are your tips?