Invoices are essential to a business since they serve as a record of all purchases and sales. Therefore, they should be accurate, complete, done professionally, and easy to understand. Unfortunately, while invoicing may seem basic, it involves a lot of important details. Omitting any of these may lead to undesirable situations such as late payments, or worse, the cancellation of all payments. With that in mind, it’s crucial to properly generate invoices every time to prevent such issues.
It’s also essential to remember that an invoice doesn’t merely represent a request for payments. More often than not, your customers or clients may judge your business’s capabilities based on the problems related to your invoicing processes.
So, if you’re a startup owner, here are the common invoicing mistakes you should avoid at all costs:
- Not Embracing Automation
Automating your invoicing process with quality accounting tools lessens human errors, allowing you to send invoices consistently and promptly. It also increases the likelihood of immediate payments.
There are other benefits of automating your invoice, and these include the following:
- Access To Real-Time Income Statement
Once you automate your invoicing, the accuracy of your startup’s income statement or profitability reporting is ensured. It enables you to make real-time data-driven decisions without the need to verify the orders that have and haven’t been invoiced.
- Streamlining Accounts Payable And Receivable
Accounts receivable and payable management is the key to maintaining positive supplier and customer relationships and getting paid on time. Trying to track customer payment terms manually may quickly result in delinquent customers and missed bills. An automated approach to generating your invoices can save time in switching between systems and fixing errors.
- Not Confirming Invoice’s Receipts
Most businesses don’t contact their customers to verify their invoice receipts. This small task can prevent various problems in the long run.
First and foremost, emailing or calling your customers to verify that they received your invoices can ensure that your due date and invoice amount are correct. If there’s a discrepancy in the quality, quantity, and timeliness of the services or goods, your customers may tell you sooner.
Verifying everybody is on the same page about the amount of payment and when it is due will take you a step closer to collecting payments for your hard work. If there are any questions or issues to sort out about the job completed, it’s wise to know about them and resolve the situation quickly rather than ending up with no customer payment.
Moreover, if you’re sending invoices by mail, they might get lost. So, a simple call or text message to confirm your invoice’s safe delivery mitigates possible problems in the long run.
- Including Unexpected Costs
Getting unexplained and unexpected costs on invoices isn’t a good surprise. You wouldn’t want to be in that kind of situation, and neither do your customers. Therefore, try to avoid placing fees in your invoices that your clients may be unaware of.
If possible, explain all the details to your customers before sending the invoice. This way, your customers won’t feel trapped and surprised when they receive it.
- Waiting To Send An Invoice
Another common invoicing mistake to avoid when running a startup is waiting too long before sending your invoices. Truth is, if you don’t send an invoice to your customers, you’ll never get paid.
Most startup owners think that sending invoices all at once before the due date or the month ends is preferable. However, the reality is that this method may cause endless delays in getting paid.
In general, you’ll get paid faster the sooner you send out invoices. Therefore, make it a habit when you deal with one-time or new clients.
- Sending An Invoice To The Wrong Recipient
Sending an invoice to the wrong person is a common mistake you should avoid. It doesn’t only reflect on your startup’s image, but it’s also a waste of your time and effort. So, before you send an invoice, make sure to carefully check your recipient’s details. This way, you can guarantee that your invoice will be sent to the right recipient and won’t end up on somebody else’s email.
- Having Unclear Terms
The other worst invoicing mistake you could make is using vague language. Quantities, prices, and item descriptions have to be clearly stated. Never use ambiguous descriptions or language that might be misunderstood. Also, ensure your customers know when your payments are due and state any interest or consequences on late payments when the terms aren’t met.
- Not Considering Your Invoice’s Appearances
Too much clutter and graphics don’t look good on your invoices. This is especially true if you’re a newly established startup. Remember that a reputable business must present a professional-looking invoice, which may include your company’s emblem, so that customers know who they’re working with.
It’s helpful to include the web address, tagline, and contact details of your business in your invoice’s footer. Fortunately, many invoicing software will allow you to customize your invoice easily. You can also search online for other simple invoicing upgrades suited for your startup.
- Missing Details On Invoices
Depending on your client’s and startup’s jurisdiction, your invoice has to comply with certain country and state laws. For this reason, avoiding missing critical details on your invoices is important. If possible, don’t forget to include the following:
- Invoice date and number
- Business name, address, and contact number
- Payment terms
- Client’s name and contact information
- Tax numbers required by the law
- Not Following Up On Late Payments
Several startups fail to chase late payments, which is typically due to the number of invoices they have to process. Once you do this, it’ll limit your startup’s cash flow, hindering your business growth.
After your initial send-outs, clients might not pay immediately and might forget to do so. You may solve this issue by sending payment reminders once the deadlines are past due. You can also remind the clients about late fees or interest for unpaid invoices to encourage them to pay promptly. Offering rewards or discounts for early payments may help you get paid quickly.
Invoicing isn’t easy for startups, and the learning curve can be a bit steep. However, it doesn’t have to be complicated. To make your invoicing process easy, avoid the mistakes mentioned above. Doing so will help you ensure consistent cash flow and help you get on top of your invoicing efforts.