Invoicing Mistakes to Avoid at your SMB
Invoicing and bookkeeping are an essential piece of the puzzle for any SMB. The work can be tedious and time consuming but it is imperative that you avoid these mistakes so that you can help your company receive payments on time and project a professional and reliable façade. Here are some highlights that we think are very important.
- Forgetting to invoice or delaying an invoice – this seems basic but it can happen with the hustle of your busy day. Send the invoice as soon as you can to start the payment clock today.
- Not following up on unpaid invoices – have a system in place to ask for updates on when you can expect payment.
- Unclear terms – every invoice should contain the terms of the payment agreement, the date of the invoice and a due date. This will allay any possible confusion and take that excuse out of your customers quiver.
- Not signing a contract – it’s in the best interest of both parties to have a signed contract so expectations are explicitly agreed on.
- Sending invoices to the wrong person or department – make sure you know the process to get paid by your customer and have the correct contact information to send to. Also, ask for a read receipt or ask for a reply confirming the receipt and that the invoice is in good order.
- Incorrect or missing details – this can cause confusion or give the customer a reason to delay payment. You should always itemize the goods that were sold or the services performed.
- Fee confusion – if the invoice includes other fees, it needs to be very clear what they are. You should also always have a late fee to encourage customers to pay on time. You do not have to enforce the fee but you should have one on the invoice as a point of leverage if it comes to that.
- Incentives – some companies offer early pay incentives. We would use these with caution if your margins are tight or you aren’t in a jam with cash flow. It’s always better to be paid in full if you can wait for your normal terms.
- Offer different ways to pay – offering your customers the ability to pay with a check, ACH or wire is a good start. Think about accepting credit cards or other electronic means of payment.
- Brand your invoices – you should have your company logo on every piece of paper that you send out. This gives your operation a professional look and lends an air of seriousness.
- Use your invoice correspondence as a marketing tool – send other promotional material like new product announcements or discounts for future purchases.
- Be polite – most customers want to pay their bills. Poor manners gives them a reason to move your invoice to the bottom of the pile. You should have a polite and professional working relationship with your customers.
- Lengthy payment terms – if the rest of your industry is net 30 and you are offering net 60, it is going to take a while to get paid and could create a cash crunch for you. This might be a good selling point but should be avoided if possible. You are not a lender.
- Know your customers payment cycle – many clients have internal procedures where all payments are made on certain days of the month. Knowing this information will stop you from asking for an update that you already ought to know and it will help you in getting your invoices over to them when you can get paid the fastest.
- Understand outside options – have a lender in place that can advance you needed working capital in a pinch when your AR balance is there but the cash isn’t.
- Using a paper based system – mailing an invoice and then waiting for a paper check to come back adds up to a week or more to the process. E-invoicing or email is the way to go.
These are just a few points of advice to speed up your cash flow cycle and get you paid as quickly as possible.
Payplant provides growth financing for entrepreneurs, by entrepreneurs. Its Pay Me NowTM digital invoice-financing service provides cash to businesses when their customers pay too slowly. Payplant helps businesses with PO and Invoice Financing, Asset Based Lending, Term Loans and Customer Financing products. Payplant works with companies that don’t currently qualify for traditional bank financing, have grown too quickly for their current lender or are at the point in their evolution where an influx of working capital can elevate their business to achieve rapid growth. Payplant delivers fast and reliable funding, at very attractive rates and is completely on demand. For more information, visit www.payplant.com.