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Your Guide to Small Business Invoicing
Invoicing is one of the most important tasks business owners face. Paying customers are what keep the lights on, after all. Essentially, the more efficient, prompt, and professional your invoicing system, the better your cash flow will be.
If you’re like many of the small businesses surveyed in an Intuit study, you could be waiting on upwards of $5,000 in unpaid invoices. When small businesses don’t get paid, neither do their employees. In short, invoicing is a critical process to nail down.
Keep reading to learn the ins and outs of invoicing for small businesses.
Set Up Automation
Automating your invoicing is one of the easiest ways to ensure dependability and accuracy with what your clients receive. Using a platform like QuickBooks or FreshBooks enables owners stay on top of all every aspect of their accounting, and that includes invoices.
The beauty in automation is that you set up the process once and let it run its magic – the idea of “set it and forget it”. In fact, most programs can save your company 10-25% of time as compared to manual invoicing. Plus, a 2015 Concur survey found that small businesses can cut down on invoice-related costs by 40-70%!
Because it’s an ongoing perfected process, you don’t have to worry about missed invoices or numbers getting miscalculated. Plus, customers also benefit because they can pay right in the platform, keeping everything in one place and streamlining the payment process for everyone involved.
Have a Follow-Up System
Between lost mail through the Post Office and emails going to a spam folder, it could be that an unpaid invoice is due to a logistical error. However, it could be due to a variety of other reasons, too. With so many factors at stake, following up on missed payments should be the backbone of your invoicing system.
You can set up automated triggers within your invoicing platform, but if you’re still invoicing the “old fashion way”, know exactly how you’re going to follow up with them to get paid. Set clear deadlines and keep track of how much time since the customer received their bill.
Penalties, like percentages of their total due, should be clearly explained right on their invoice with each milestone that passes. For example, you may charge a 5% fee if they haven’t paid in thirty days, and a 10% fee after sixty days, increasing the fee as more time elapses. Without explicit consequences, customers will be less likely to pay their bills promptly.
Designing and Laying Out Your Invoices
The design shouldn’t be cluttered or flashy; just professional and clean so customers can quickly and easily know what they owe and by when.
First and foremost, your logo and the date should be prominent at the top of the invoice. As mentioned before, you should also include penalty dates, so they know how much time they have before facing a consequence.
As important as design is, what’s most important is the content of the invoice. It should be simple to follow and lead to minimal confusion. List details by line item for all services, products, and fees to reduce any disagreements between you and the customer.
When it comes to invoicing, words matter! Use clear, easy-to-understand language to make the bill as simple as possible. FreshBooks determined that using the phrase “upon receipt” can be up for interpretation, and it can lead to delayed payment.
This study also concluded that using polite language like “thank you for your business” or “please pay promptly” can increase the percentage of invoices paid by five percent!
Set Clear Expectations
One of the most frustrating parts of invoicing for customers is when they’re surprised. If they receive a bill that is different than what they expected, payment will likely be delayed or not paid at all. In addition, surprising them – whether they didn’t expect to see an invoice or the fact that it’s incorrect – can create a sense of distrust in your relationship.
Essentially, make sure that all invoices match the original quote given. If the invoice is different than the last one or differs from the estimate, explain to the customer why there’s a discrepancy. You can also include notes right on the invoice for complete clarity.
Creating and sending invoices is critical to maintaining a healthy cashflow. Use these tips to streamline your invoicing process and improve your customers’ timeliness on payments.
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