Proper handling of invoices is not one of the most commonly discussed topics in the business world, but it’s certainly an important one. One of the major ways of guaranteeing a steady cash flow is by ensuring that your invoices are in order — and a mistake or missed date could negatively impact cash flow.
Invoicing is a vital part of any small or midsize business operation — payment for goods and services is important after all. To ensure you get it right, you need to get acquainted with the invoicing best practices, as well as preparing a complete and highly professional invoice.
Here are invoicing best practices for small and midsize businesses:
1. Include All the Necessary Details
Including all the essential details in the invoices that you send out is important in order to receive a rapid response. Every invoice should include these details:
- Date of issue
- Invoice number
- Your business name and address
- Your client’s name and address
- The due date
- Your bank details
- Your contact details
If it is required, you should also include VAT number, client references and other purchase details. However, if you are using bookkeeping software or an invoice template, these details would be included automatically. But if you create manual invoices, then it’s up to you to not miss out on any of these details.
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2. Send Out Invoices Early
If you want to get paid on time, then this is definitely one tip you need to take to heart. As soon as you get supplies, you should send out invoices to the right people. This way, your client has more time to sort out their finances, increasing the likelihood that you’ll get paid when your invoice is due.
Sending out invoices early also prevents you from forgetting to send out certain invoices. Plus, you get more time to focus on your business and make new customers instead of rushing to send invoices at the last minute.
Clients prefer businesses that do the right things at the right times so you’re indirectly building up your own reputation, too.
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3. Address the Invoice to Your Contact
Addressing your invoice to the person who hired you or approved the purchase is an indirect way to mount pressure on people to pay their bills — especially when they represent a company. Although the address field for an invoice should include the company name and mailing details, the invoice itself should be directly addressed to the name of whoever approved that particular purchase.
So, instead of the invoice joining the list of other invoices addressed to the company, which may remain unpaid for a while, it goes directly to that person. This way, whoever approved purchase can easily confirm the charges and set your payment in motion.
In addition, including their names would make them feel personally responsible for the purchase so they would most likely ensure that it is taken care of quickly to keep their reputation positive in their own workplace.
4. Describe Charges Clearly
You should describe everything you are billing your client for within the invoice. Your invoice may be accurate but if your client has issues understanding it, they might not want to make the payment without more clarity, which can both delay payment and create trust issues.
Similarly, your client would be spending the time that he should use to process your payment on trying to decipher your invoice. So you should include a comprehensive breakdown of all the charges within your invoice.
This should include packaging and delivery fees alongside the costs of the product. And if you render services, you should provide a comprehensive copy of your timesheet. This is one of the ways to get a client to pay on time.
5. Send Friendly Reminders
We are all prone to forgetting things, your clients are no different. Sending a professional yet friendly reminder periodically is a great way to make them keep you in mind. But only do so if payment is delayed beyond reason — you don’t want to remind them to pay an invoice you sent yesterday; that could come off as pushy.
Your clients are busy with other things, so a reminder can bring your invoice to top of mind. You could do this by placing a call to them or sending an email. If you are sending an email, you need to be certain that your client would view it. Also, depending on the level of urgency, you may have to send reminders a few times; well spaced out. Then when the invoice due date is very close, you may send a final reminder.
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6. Be Appreciative
You have no idea how far a simple heartfelt “thank you” can go. Building quality relationships is an essential part of business and showing appreciation is a strong foundation to build upon.
Once your invoice is cleared and you receive your payment, be sure to confirm receipt and show appreciation. Remind them of how much you appreciate their doing business with you and that you look forward to future interactions.
All of these could serve to seal you a permanent deal with them so that they keep coming back. Also, referrals are great for businesses so you never know how big a deal a simple “thank you” might bring you.
The Bottom Line
These proven best practices can help your business, both in regards to getting paid and efficiency. Remember that all these tips require action so you should be ready to put the work in. With practices like this in place, cash flow for your business should not be an issue.
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