Posted by Deepshikha Shukla
February 9, 2021 | 9-minute read (1660 words)
A detailed invoice system can help you keep a record of your business transactions, file taxes and settle business claims. To keep income flowing, every business needs to generate and send out invoices, but sometimes this task falls to the bottom of the to-do list as entrepreneurs get busy handling other aspects of their business. Check out some of the best practices to ensure that invoices go out on time and are accurate and complete, so payments come through swiftly.
What Your Invoice Should Include
Whether you choose to create an invoice on your computer or by using an app, you must include the following information for a complete invoice.
A Strong Header
Label the invoice at the top and name it, so your customer knows what it is about when they open it. Also, ensure that your invoice includes your logo in the header.
An Invoice Number
Mention an invoice number and unique identifier (project name or number) to separate a particular invoice from every other invoice you send. Numbering invoices will make it much easier for both you and your customers to search or track payments related to it.
Your Company’s Name and Contact Information
Make sure all of your information is listed correctly in your invoice. Always include your business' legal name, email, physical address and phone number in your invoice. You can fill in all of that information quickly with a pre-designed template available in your invoicing software. With this information readily available, your customers can contact you in case of any questions.
Issue and Invoice Date
Including issue and invoice dates can help you check and confirm dates of services or product shipments whenever Necessary.
A Description of the Products or Services Purchased
Make sure to list details of the product or service delivered as a separate line item, so your customers know what they're paying for. You can include the following details in your invoice:
- Name of the products sold or services provided
- The billing period, date of invoicing and delivery date of the good or service
- Handling fees, sales taxes or any other money that the customer needs to pay
- Quantity of the goods or services provided
- Additional materials that were purchased to complete a job or hours to complete a project.
A Personalized Message
Write a brief note at the end of the invoice to thank your customers for their business. You can also use the message field to mention a project if you did something unique for the client.
Total Amount Due
State the total amount of money due on your invoice, with all taxes included. Make it bold and a little larger than the other text to highlight. Also, mention the available payment methods and your bank details so your customer knows how they can pay you most conveniently.
Payment Terms and the Due Date
Specify the payment terms on your invoice, along with late payment and fee details if customers do not meet the terms. Including the due date on your invoice informs your customers about the time to make the payment and the new total they will owe if they pay after the due date.
Your Client’s Name and Billing Address
To send the invoice to the right person, make sure you list the customer’s name, title and contact information, such as their email, billing address, phone numbers and physical address correctly.
Why Accurate Invoices Are Important
Ensuring that your invoices are professional and complete is critical to your success and ensures positive cash flow for your business. Here are a few more reasons why invoices need to be accurate.
Get Timely Payments – Companies typically don’t make payments until they receive invoices for goods and services delivered. Preparing and sending accurate invoices promptly after a sale can help you get paid or collect payments on time. Setting up recurring billing for repeat customers can further speed up the process.
Provide Legal Protection
– Invoices can serve as legally binding agreements between a business and its clients, thus protecting businesses from lawsuits. Invoices allow you to keep a record of the products or services delivered, money owed and details of the companies involved.
Develop Marketing Strategies – Records of your invoices can help you identify peak times when your products or services were in demand, and the most and least popular products or services you offer. Once you analyze such trends in your business, you can develop marketing strategies based on these trends to grow your business.
To Track Sales – Invoices can help businesses record and track their sales and manage their cash flow. They can also help you determine the average amount of time it takes you to receive payment from your client, the status of payment and the dates when transactions happened.
Analyze Your Business – Invoices provide valuable data regarding how your sales change over time that you can use to create accurate business forecasts. You can use invoices to determine the goods or services with the highest sales volume and those that bring in the highest revenue. Invoices can also help you identify the top-performing sales employees and the profit they bring.
For Filing Taxes – Your invoices provide documentation that can help you file taxes or even carry out an internal audit. Moreover, invoices also make it easy to claim tax refunds.
12 Invoicing Best Practices
The better your billing practices are, the fewer questions your customers will have about their bills. Here we've listed 12 best practices to ensure that your invoices go out on time and you receive the payments in a timely manner.
Work on Your Contract
Contracts are legally binding agreements that can influence how you create your invoices. While creating a contract, make sure you lay out all the details and terms required to make a sale. It should also define what legal actions you can take against your customer if they refuse or fail to pay.
Have a Thorough Breakdown of the Charges
Explain each aspect of the total price of products or services delivered, such as their packaging or delivery cost, sales or service tax costs and hourly rate. Detailed information will help your customer better understand how you arrived at the total amount and how many hours you worked.
Send Invoices as Soon as Possible
You need to send an invoice as soon as you complete a project or deliver a product if you want your invoices to be paid quickly and maintain cash flow.
Consider Using Read Receipts
Turning on read receipts using your bookkeeping/invoicing software will notify you when your customer opens the invoice. Knowing when your customer has opened your email or invoice also allows you to send payment reminders based on that time frame.
Offer Multiple Ways to Pay Your Business Invoice
Always provide your clients with various payment methods to speed up the payment process. The more options your clients have to pay, the more likely they will pay you early. Always include the information about accepted payment methods on your invoice.
Follow Up with Professional Reminders
Sometimes clients take a while to pay you, which can be irritating. However, it’s essential to remain professional and follow up with customers so you get paid faster. Send your customers a friendly reminder via text or email, or reach out to them via a call to ensure they’ve received the invoice and will pay you soon. Always speak directly to the person in the company who is in charge of managing the finances and has the authority to make payments.
Emphasize Your Payment Terms
Define the payment terms in your invoice to ensure that your customers know the date of delivery, the due date for payment and late fees you may charge (as regulated by the state, when applicable) if they don’t pay on time.
Incentivize Early Payment
Offer a discount to your customers on the total amount of the invoice or a future purchase if they pay early or before the due date. You can also offer them a referral incentive for recommending your company to their friends.
Send a Thank You Note
You should thank your customers for their timely payments, let them know you appreciate their business, and tell them you will be there in case of any questions or concerns. This polite final touch can make a positive and lasting impression on your clients, and they may consider your company when it comes to buy other items or services.
Provide the Correct and Complete Information
By ensuring that each invoice contains the right information and sending it to the right person, you can receive payments on time. Always include an invoice date, an invoice number for tracking inventory and your business’ progress, the total amount due, due date and the right billing address in your invoice. Also, provide any information that your customer may require to process the payment request, such as purchase orders or approved timesheets.
Use a Cloud-Based Invoicing System
Using an electronic invoicing system allows you to create and send bills electronically. With invoicing software, you can send invoices and payment reminders automatically in a timely, consistent manner. Most invoicing software systems also back up and store your invoices on the cloud, thus making them easy to retrieve. They also allow you to save descriptions of different products or services and quickly include them on the invoice. Thus, you can save time and increase the invoice accuracy by auto-filling the information in an invoice.
Maintain a Good Relationship with Your Buyer
Staying in constant contact with your buyer can help you identify how they pay their bills and the right person to reach out in case of any delay. Consider the following three things when contacting your buyer for payments:
- Notify your buyer when you initially issue an invoice.
- Follow up a few days after the invoice delivery to confirm its receipt.
- Reach out for payment status before the payment is due.