No one-size-fits-all invoicing strategy will work for every business, but there are plenty of pitfalls you should avoid when managing the billing processes.
Many of us have made a mistake in this realm, so don’t fret if you’ve committed one of the following invoicing snafus in your business. Having an organized strategy will not only help you get paid faster, but it will also create a seamless accounting system on the backend.
Cash flow is critical to managing the day-to-day operations, from the basics like keeping the bills paid, getting employees paid (on time), and long-term goals like maintaining a stable organizational structure. We’ve laid out 13 common invoicing mistakes that could hurt the cash flow of your business.
Not Following Proper Payment Procedures
The first piece in the invoicing equation — and avoiding mistakes — is to follow proper payment procedures as laid out by your payment processing partner. This means not storing your customer’s credit card numbers on your systems (against PCI-DSS payment regulations). The best way to avoid this pitfall is to work with a payment processing partner that eliminates this problem and helps your business stay compliant. The same goes for storing data on the cloud — it should only be done using an encrypted method.
Being Tardy on Your Invoices
Next, don’t be late when sending invoices. Not only will it be harder to get paid for work that’s long passed, but your customer also won’t appreciate getting invoices late. If you agreed to a payment period, then send out invoices on the agreed upon date. Being late will hurt your cash flow and your reputation.
Not Specifying When an Invoice Is Due
Similarly to being late, not having a set due date will confuse your customers. Have a set date established for when a partial or full payment is due. Your customers want to know when their bills are unpaid, just as much as your company wants to have payments flowing in on time. Having set due dates will benefit both sides of the relationship.
Not Having The Right Contact Person
When sending an invoice, you’ll want to ensure you’re sending to the right point person to get paid — otherwise, you risk causing delays in payments. When establishing a business relationship, your accounting processes must be in sync with the right contact to bill for each invoice. Not having this established will most certainly cause unnecessary confusion and friction in the process.
Sending an Invoice Without an Itemized List
There’s nothing that strains a business relationship more than not knowing what they are paying for. When sending an invoice, include a bulleted list explaining each charge. Having an organized and itemized list also helps to keeps your internal records straight.
Not Respecting the Partnership Relationship
Valuing both sides of a B2B relationship is essential. This translates across the invoicing process. That means an invoice should be reasonably priced, sent in a timely fashion and accurately reflect the services completed.
Not Emphasizing Payment Terms
Transparent terms are another essential element to a successful business relationship. Each contract and invoice should clearly state how and when payments should be made. Not having proper payment terms will create delays in the payment process and could potentially harm your customer relationship.
Failing To Follow-Up on the Invoice
Every business wants to get paid and paid fast! The reality, however, is that some customers forget to pay in a timely fashion. The easiest way to overcome this hurdle is to have a strategy in place that allows you to immediately follow up with any customer who’s missed the payment date. Cash flow is critical for your business, and falling behind on invoices can cause a dysfunctional ripple effect across your organization.
Making It Difficult to Get Paid
Have multiple methods for your partners to pay you for services can reduce friction in your relationship. In today’s digital-first era your business must offer various payment methods with each invoice. This is one sure way to get paid faster and maintain better business relationships.
Sending an Invoice with Hidden Charges
Transparency is the key to any good B2B relationship. When sending an invoice, each charge should match the terms and expectations as agreed upon by both parties. Don’t hurt your reputation by adding hidden fees to an invoice.
Having Errors in Your Invoice
Similar to not being transparent, having errors in your invoice can also strain a relationship. Not only does it cause extra paperwork, extra unnecessary checks-and-balances by both parties, but it can throw off your accounting process. Tracking down errors on invoices wastes time, money, and resources. Double check your work and get the numbers right the first time.
Not Having a Proper Contract
Nothing is secure in a B2B relationship without a proper contract. A contract lays out the terms for expectations, payment schedules, legal terms and more. Contracts also ensure that your business has the right to get paid for services completed if your customer doesn’t follow up on their end of the bargain. Agreements go a long way in ensuring a smooth, professional relationship.
Not Being Flexible and Transparent
As mentioned above, transparency is vital in a partnership. So is being flexible. When an invoice is sent, it’s not always paid on time or correctly followed up with. What’s important is remembering to be flexible as to why a client may not have paid up on time. Follow up in a respectfully, but realize that life happens and be flexible when there are reasonable delays.
Although there are many different invoicing strategies, we hope this article helps you recognize the pitfalls everyone must avoid when managing the invoicing process.