If you run a business, you want to get paid for your work. It’s that simple. The problem is when you make an invoice mistake that results in you not getting paid. Invoicing is an integral part of every business as it leads to receiving money due. It’s essential to get it right to lead to your business’s success and sustained operations.
Some businesses still don’t have proper invoicing procedures in place despite this. The result is mismanaged cash flow, inability to pay your bills on time, and even issues with paying your team. Here are some of the most common invoicing mistakes made by small businesses and how to avoid them.
1. Not invoicing your customer immediately
Your business should always invoice on the day of a transaction. Failing to invoice on the day of a transaction can lead to you forgetting to invoice a customer. If you delay an invoice, you’re extending the time it will take for a customer to pay you. This affects your cash flow.
By ensuring your bank details are correct and that you sent the invoice to the relevant accounts section of the invoiced company, you can facilitate more prompt payment. So it’s important to have an invoice process that begins the moment you have completed work for a customer.
Remember that it’s your responsibility to invoice your customers. If you don’t send out an invoice immediately, the chances are that the recipient isn’t going to chase you up about it. Always send out an invoice as soon as possible after any work is complete.
2. Forgetting to invoice
One major issue is when you forget to send out an invoice. If you fail to send out an invoice, the customer is likely to forget they have to pay you. Even the best customer in the world can forget they owe you money, and a misplaced or forgotten invoice will only lead to poor cash flow management.
Of course, running a business means many responsibilities, and forgetting to send an invoice is easy to do. That’s why you must use a formal structure for your invoicing. Cloud-based accounting software can help create automated debtor statements that can be sent out and delivered automatically.
Bear in mind that if you forget to send out an invoice once, the chances are that you’ve done it before. If you discover a forgotten invoice, it’s worth looking through your accounting records in case other payments have been missed.
3. Invoicing the wrong recipient
If you’re dealing with large companies, an extremely common invoicing mistake is to send the invoice to the wrong person. You might have been chatting with a customer service member, but they aren’t often going to be the person to send the invoice to. The correct invoice sent to the wrong person leads to payment delays, which looks unprofessional.
Always check where your invoices are meant to be going. If it’s a large company, you’ll be invoicing a finance team or accounting department. If there’s any doubt, get in touch and ask for clarification. Record the details in your accounting software to send out any future invoices to that company faster and with 100% accuracy.
4. Error filled invoices
Invoices need to be accurate. If you send out an invoice with the wrong details, especially the wrong total amount payable, then you look unprofessional. This kind of invoicing mistake could end up with you losing customers. So always double-check the details. Make sure that every invoice has:
- An invoice date
- Unique invoice number
- Due date
- Your company name and contact details
- The physical address of your business
- The named recipient of the invoice
- Tax details
- Payment terms
- A breakdown of the provided products and services (more on that later).
If you’re still using a standard spreadsheet like Excel to create your invoices, then invoicing mistakes will be very common. You need an accounting tool that will check your invoice details and automatically generate your unique invoice numbers for each invoice. This looks far more professional and could make a difference in whether your business gets used again.
5. Not itemising products and services
Instead of sending an invoice to a customer with just the amount they owe, you should break down what they are paying for. You can break it down into broad terms or be specific. This is to show your customer exactly what they are required to pay for. If there are multiple items on the invoice, you should break down each item with their price and then calculate the total with the taxes where applicable.
This might not be 100% relevant for your business or a specific customer. You could have a very straightforward business model that only offers one product or service. Breakdowns are going to be less important in those cases. For larger businesses, itemisation is essential to get right.
6. Ignoring late payments
If you ignore a late payment, you increase your chances of never getting paid for your work. Forgetting, or being too embarrassed to chase up late invoice payments, is one of the most common invoicing mistakes. That’s especially true for smaller businesses that may not have an invoice process.
That’s why it’s so important to have a more formal structure for both writing your invoice and your invoice management. You need to know what invoices have been sent out, what’s been paid, and what hasn’t. That information needs to be monitored and updated in real-time. So when you spot that an invoice is coming to a payment deadline, get ahead of the problem by reaching out. It could be that the person who owes is having cash flow problems. Identify the issue, and you can start to find resolutions such as ongoing part payments.
7. Vague payment terms
Sometimes, invoices aren’t paid on time because the recipient isn’t sure of the terms of that invoice. That’s often down to a lack of clarity on your invoices. The payment terms need to be clearly stated and easy to understand. One of the most common invoicing mistakes is forgetting to add a due date.
This always needs to be very clearly marked because if it’s misread, misunderstood, or not added to the invoice, you’re going to encounter payment challenges. A common payment date is 14 days from the receipt of the invoice. This gives your clients a decent window to pay in, and it’s also not so long that you can forget about the due payment.
Don’t forget that if you have any late payment terms, such as additional fees for a payment made after the due date, those terms also need to be expressed clearly on your invoices. You don’t want a good customer to be surprised by additional fees they weren’t expecting.
8. Making payments difficult
The more difficult you make it for your customers to pay you, the more likely you will run into invoicing problems and late payments. Ideally, customers need to be able to pay you in a way that’s convenient and stress-free for them. Whatever your preferred payment methods, make sure that these are visible on your invoices.
If you’re sending out physical invoices, your best bet is to include your banking details. You can also add links to your PayPal, Stripe, or other third-party payment gateways if you’re sending digital invoices. The key here is to make paying the invoice as easy as possible. The more roadblocks your customers encounter, the more likely they will put off paying the invoice until they have more time to work out how.
9. Lack of invoice branding
You likely spent a lot of time on your branding. That branding sets your company’s tone, and it’s the first representation of your business that most people will see. That’s why it’s always a good idea to include your branding on your invoices. This isn’t a major invoicing mistake, but it can help to avoid confusion.
A branded invoice will stand out, be remembered, and show that the customer has a payment to make to your business. Don’t forget that if your customers are a business that receives a lot of invoices, it’s easy to disregard some to reduce workload. With a big, bright, and branded invoice, it will be harder to overlook or ignore.
Often businesses are unsure about what is legally required on invoices, leading to accidental illegal conduct. Once the requirements are established, your business should create professional invoices that always include your logo, other branding elements, and basic invoice information.
10. Not having back-ups
Not saving or backing up your invoices is another common mistake made when invoicing. Your computer might crash, or there’s a fire, and your physical invoices are destroyed. In this scenario, you will regret not backing up your invoices. Failing to backup files can reduce your ability to invoice customers and keep track of debtors.
Not only does backing up your invoices protect you in the case of unexpected damage, but they are also essential when it comes to the end of the tax year. As you’re getting your books ready for the new business year, you need to ensure that all of your accounting for the previous year is correct. Mistakes will make reconciliation difficult, even more so if you have to dig through mountains of paper invoices looking for that single invoice that didn’t get paid.
11. Invoices as a marketing tool
This isn’t one of the serious invoicing mistakes small business owners make, but it is one of the most common ones. Remember that sending out an invoice, whether via email or through the post, means that you’re communicating with a client. So your invoices can act as a means of boosting your marketing. As you send out your invoices, remember to add any details about any upcoming special offers.
These are particularly useful if you target your invoicing messages. So if a customer has recently purchased 10 units of a specific product, let them know that there’s a discount if they order 20. It’s always wise to offer incentives to your returning customers. When an invoice can be the end of a complete customer journey, adding some marketing to your communications can begin that cycle again.
Invoicing mistakes can happen to anyone
Invoicing isn’t often exciting, and it’s rarely a fun part of running a business (unless the invoice is for your biggest ever sale, in which case it can get a little bit exciting!). Most invoicing is simply part of a business process, and that can make mistakes with invoices easy to happen.
Every business should educate themselves on the legal requirements for invoices. Our five-part video training series, Account-Ability, makes it easy to understand the format of invoices along with many other essential accounting topics.
Don’t forget that cloud-based accounting software will always make your invoices easy to create, deliver, track, and record. They can be automated, too, meaning that you spend less time balancing your books and more time running your business. And when your bookkeeping can be the guide you need to grow your business, the right accounting software is more critical than ever.
If you’d like to learn more about how our leading accounting software can help you grow your business, get in touch with our friendly team today. We can walk through your specific needs and give you tips on how best to use your accounting software to maximise your brand’s potential.
If you’re already aware of how important choosing the right accounting software is, then why not try our free trial? Get hands-on experience using our award-winning accounting software, and find out just how easy balancing your books can be.