Can you answer yes to all these questions?
- Do you raise an invoice immediately after you have supplied the goods or service?
- Do you make sure that everything the customer requires appears on the invoice?
- Do you have an effective accounting system and have you considered using dedicated accounting software?
- Do you have a process for investigating and resolving disputed invoices immediately after the query is raised?
- Do you log the details of disputes so you can fix any avoidable root causes?
- Do you keep documentation relating to disputes as evidence in case the problem escalates?
- Do you keep a record of the customers that dispute invoices so you can spot any who do so regularly as a way of avoiding prompt payment?
- Do you ensure your sales invoices are fully compliant with HMRC requirement for VAT if you are registered?
Five top invoicing tips
1. The sooner you ask, the sooner you can get paid; send invoices by first class post or, better still, by email.
2. Get invoices right first time; raising credit notes and reissuing invoices takes up resources and time better spent elsewhere. It also changes the payment due date.
3. Ask customers what they need on the invoice in order to approve it simply and quickly. Include at least the following:
- Your full name and address
- Your VAT registration number
- Invoice date
- Correct customer name
- Correct customer address
- Delivery address (if different)
- Delivery date and method
- Customer purchase order number
- A clear description of the goods or service supplied
- Accurate quantities, prices, discounts and total amount due
- Payment terms and due date
- How payment should be made with bank details (including sort-code and account number from bank statement)
- Invoice number or other reference to be quoted by payer
- Payment terms and due date and the reference to be quoted if payment is by direct credit.
4. Include the words: ‘We will exercise our statutory right to claim interest (at 8% over the Bank of England base rate) and compensation for debt recovery costs under the Late Payment legislation if we are not paid according to our agreed credit terms’ on every invoice, and print your terms and conditions on the back.
5. Have a system for resolving disputed invoices promptly, especially if a customer is using a small query to withhold.
This post has been adapted, with permission, from the latest (and very useful!) Managing cashflow guides publication, produced by the Institute of Credit Management (ICM) in association with ACCA (The Association of Chartered Certified Accountants).
We urge you to download all the guides – they include tips on knowing your customer, payment terms, treating suppliers fairly and credit insurance.
Could you answer yes to the questions above? Will you change anything now?