You may be sabotaging your business with these bad habits
According to a QuickBooks report involving 500 self-employed workers and 400 small business owners, 8% of self-employed workers and 4% of small business owners say half or more of their invoices are paid late, resulting in various cash flow issues. It’s also been found that small businesses were owed $825 billion in unpaid invoices over the course of 12 months, according to research published in 2016. That’s nine zeroes. If you need a bit more perspective, the figure is equivalent to 5% of our country’s GDP.
For business owners and the self-employed, invoicing may feel like a no-brainer. But what if there is a lot more to invoicing that just letting your customers know what they owe, so they can pay you? Here are five ways you may be invoicing the wrong way and hurting your chances at getting paid pronto.
1. You invoice the wrong person
You know that feeling of receiving something in the mail addressed to someone else? It might be an important document, but the likelihood of reaching its rightful owner has been significantly reduced. This is what happens when you send your invoice to the wrong person. It causes unnecessary delay and confusion.
When finalizing a job or project with your client, find out who you should get in touch with to get paid. Shoot over a quick email to introduce your business, so that person will know to expect your invoice when the time comes.
2. You invoice with zero expectations
Just like any relationship, there are expectations on all sides. Your clients expect you to deliver specific services and products. You, in turn, expect to be paid for your work. An invoice does more than tell your clients what they’re owed and the payment options. Other information might include:
- Incentives for prompt payment. Consider offering a discount to clients who pay on time or early. Another option is to offer a discount for upcoming work, which also serves as a great retention plan.
- Penalties for late payments. In the U.S., the law for late fees varies state to state, so be sure to get legal counsel prior to implementing your late-payment policy.
3. Your invoice lacks personalization and personality
Before you give us that disapproving eye roll, consider this: It’s been found that businesses are three times more likely to get paid just by adding a company logo to their invoice. And many accounting solutions offer free invoice generators where you can personalize the document by adding your company logo. Your invoice is another extension of your business, while your logo serves as an immediate identifier, your marketing collateral, and brand ambassador, all in one.
Imagine buying a limited edition Cartier in 18k pink gold and a faceted blue sapphire, only to be handed a handwritten bill on a crumpled post-it note. It’s unbecoming and unprofessional.
4. You invoice on your own time
Every client is different, so your invoice to them should be customized, just like the work you do for each. Typically, the advice is to invoice immediately for two obvious reasons: So you don’t forget and to capitalize on the customer’s satisfaction with what you’ve delivered.
But there’s a lot more science and study that goes into the story. The time, date, and day of the month all play a role in ensuring payment. If you invoice your client on the seventh but they only pay on the first of the month, that’s almost 30 days of waiting. Your cash flow is not going to like this arrangement. If you email your invoice, the open rate may vary by industry. In short, there isn’t a one-size-fits-all solution.
5. You invoice manually
If to err is human, think of all that might go wrong with a manual invoicing process. The mere mention of duplication, missed discounts, or forgotten credits would send shivers down the spine of any person in accounts receivable. Now think of all the times payment has been delayed to you because your clients also process invoices manually, even though your invoice was perfection. Painful? Our point exactly. It’s wasted time and resources, through and through.
Invoicing lets you control what you can
In the QuickBooks report, 59% of respondents have waited between one month and more than two years to get paid. For self-employed workers, late payments affect their professional and personal lives, from causing arguments at home to unplanned loans and insomnia.
There are many reasons why late payments are often out of your control, but having a good invoicing process in place is not one of them. An invoice doesn’t just help you get paid. It is a legal document that can be used as evidence to settle any disputes or audits that come your way. And the benefits are not just yours to enjoy. Your clients will thank you for your timely, easy-to-understand, and accurate invoices as well.