Common Invoice Mistakes to Avoid

As a business owner you should know that cash flow, and not profit, is the most important part of your business. But, in order to have a positive cash flow, you first need to have cash flowing into your business. And that can only be achieved through invoicing. Even though invoicing isn’t the most exciting of tasks, it’s a continuous task that deserves your full attention. The thing is, invoicing is more involved than just asking a friend to Venmo you some cash. It’s a process that can make or break your business. To ensure that your business thrives, here are the most common invoice mistakes to avoid.

Forgetting to invoice.

This may sound obvious, but there times when invoicing just slips through the cracks. After all, we all get bogged down by work or must handle an emergency like a natural disaster. There are even times when we just assume that a client will automatically pay the bill once completed.

Always remember, however, that it’s your responsibility to create and send out invoices in a timely manner. As such, invoicing should always be a priority. Either schedule specific times to invoice or automate the process with recurring billing.

Failing to specify payment due date.

There’s plenty of business owners who make the mistake of sending “open invoices” to their clients. This means that the invoice includes vague payment terms, such as “Due Upon Receipt or “Net 30.” Not all recipients understand that these examples mean that the bill is due immediately or within 30 days.

To avoid any confusion, make certain that your specify exact payment due dates. For instance, if you submit your invoice on October 1 and want a payment within a week, the payment date should be set for October 8.

Sending invoices to the wrong person.

You’re point of contact isn’t always the individual who will be paying the invoice. In fact, the bill may be sent to a client’s accountant or their billing department. When the invoice is sent to the wrong person, it’s going to slow down the payment process.

If you’re unsure who is responsible for handling invoices, send a quick email to your client to verify the name and address of the right person prior to creating and sending out the invoice.

Not including proper item descriptions.

One of the most important components of proper invoicing is including an itemized list of the services rendered. If not, the client may get confused about what you’re charging them for. Even worse, they may even questions whether or not you’re overcharging them.

In either case, this will delay payment. It may even put a strain on the relationship with the client since they no longer trust your. When that happens, you can be certain that they won’t hire you again or refer you to others.

Unclear pricing and unexplained fees.

It’s not uncommon for the pricing of products and services to be 100 percent clear on the invoice. This could include higher rates for hourly work, additional expenses, or taxes that weren’t previously discussed. Always be transparent with your pricing in your invoices by clearly describing your pricing.

Unlike an unexpected gift, clients don’t want any surprises when they review an invoice. When you client receives an invoice, they at least want to have a general idea on what they’re being charged for. Again, if an unexpected expense does arise, explain this in the invoice.

Unprofessional invoices.

There’s nothing wrong with creating an invoice with Excel or using a generic invoice template provided through gateways like PayPal. The problem is that they’re unprofessional. As a result, the client may believe that you’re not a professional who deserves to be paid on-time.

You invoices are another way to show that you’re a talented individual who has earned every penny. For example, would your clients take you seriously as a graphic designer if you sent them an invoice that wasn’t creative or original?

Not branding your invoices.

It’s been found that you’re 3x more likely to get paid just by adding a logo to your invoice. The reason? A logo verifies that you’re a professional.

More importantly, logos are a great branding opportunity that differentiates you from the other invoices coming across your client’s desk.

On top of your logo, also make sure that you use colors, fonts, and templates that match your brand.

Not showing courtesy.

Believe it or not, saying “please” and “thank you” can go a long way. In fact, showing your courtesy can increase the percentage of invoices paid on time by 5%.

So, the next time you send out an invoice, don’t hesitate to include phrases like “Thank you for your business,” or “Please pay by [insert date].”

Not offering multiple payment options.

Want to ensure that your invoices always get paid quickly? Make it easy for your clients to pay you. This means including a variety of payment options that your business accepts.

This includes everything from credit card processing, direct bank deposits, eChecks, and even newer forms like cryptocurrencies. Since most of these payment options are fast, secure, and efficient, for both you and your customers, the invoice should be paid on-time.

No late fees or discounts.

Why would a client be motivated to pay an invoice when there are no repercussions for missing the due date? Establish late fees in your policies so that your clients have an incentive to pay on time. For example, charge a certain percentage after X days past the due.

Another way to incentive clients is to offer discounts for early payments. Even a 1% or 2% off the total amount of the bill is enough to encourage a payment before the due date.

No clear Terms & Conditions.

I can’t stress this enough. You should always have Terms and Conditions in place. These are going to spell out all late fees, pricing, and other details about your products and services. These policies should be discussed in advance and also clearly stated on your invoice.

Having clear Terms and Conditions will answer any questions or concerns regarding the invoice. Again, when you clear up any confusion, the invoice is going to be paid faster.

Not signing a contract.

Take these words of wisdom from Sir Richard Branson to heart; “In an ideal world, a handshake would be all that an entrepreneur or executive needs to seal a deal with a business partner.”

Unfortunately, business conditions are bound to change due to outside forces like the economy or consumer tastes. And, when that happens, so does the arrangement you and the client had agreed-on.

By signing a simple contract ensures that both parties are protected, as well on the same page, in regards to payments. As Branson notes, “By all means, shake hands on a deal, but then make sure to ask your lawyers to record the details. It could be the best bill you ever pay!”

No copies or digital backups.

Each and every invoice that you send should be backed up. In the past, a paper copy would suffice. But, what happens if that paper copy is lost or damaged?

Today, your better option is to have digital copies stored on the cloud. This way you can easily retrieve the invoice in the case that you get audited or the client requests a fresh copy. And, since it’s on the cloud, you can be certain that it will always be there when you need it.

And, the good news is most invoicing software will automatically create digital backups for you.

Not following up on unpaid invoices.

Even if you’ve followed invoicing best practices, there will be times when the client misses the due date. This could be due to a variety of reasons. They could have misplaced the invoice, forgot about it, or are just deadbeats.

Like making invoicing a priority, following-up on unpaid invoices is your responsibility. When the client misses the due date, contact them immediately to find out what’s going. A quick email or phone should resolve the problem.

You can also use invoicing software that will send out automated reminders or “ping” the client until a payment has been made.

What if the client is unresponsive? You may have to take more extreme measures like taking them to small claims court or having a collection agency chase down the payment for you. If you’re in a pinch and need cash now, you may have to turn to invoice factoring.

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