Contrary to popular belief, simply sending out invoices doesn't mean you'll definitely get paid on time — or even at all. Until the customer's money appears in your company's bank account, you can't use it to pay employees, pay bills, or pay yourself. Your collections manager might be on pins and needles waiting for invoice payments to come in — but it doesn't have to be that way. Once your invoices have been sent there are a lot of different approaches you can take to speed up collections while keeping your customers happy.
Let's back up a bit. Before you send the invoice, there are things you can do to give it the best chance of getting noticed so your customers remember to send payment.
Today, we'll dive in and take a look at the best tips and tricks for optimizing your invoice and what to do once your invoice is sent!
What Exactly Is an Invoice?
An invoice is an itemized list of products or services rendered to a customer. Each item's price is added up to the total amount shown at the bottom of the invoice, which represents what the customer owes.
Once you send your invoice to the customer, it becomes a bill. Companies and individual freelancers can both send invoices. Customers receive them as bills, which is what they would call your invoice from their perspective.
Once payment is made — whether with cash, debit or credit cards, PayPal, or some other method — you will send the customer a receipt. A receipt also has a list of products and/or services itemized added up for the total amount. Unlike an invoice or bill, receipts show payment has already occurred.
Why Does Optimizing Invoices Matter?
Large businesses may have the art of invoicing down to a science, but small business owners or fresh startups might not understand the possible pitfalls to watch for.
If budgets are tight and expenditures are outpacing profits, every dime that rolls in the door is essential.
According to a report b Get Paid + Amalto, your invoice has less than a perfect chance of getting paid. In fact:
- 39% of all invoices sent in the US get paid late
- Incorrect invoices are responsible for 61% of late payments
- 11% of customers never even receive their invoices
If your invoicing is sloppy, you're leaving money on the table and setting yourself up for a longer payment cycle. This problem gets compounded because people generally don't want to deal with a company that makes it difficult to pay them!
To get those customer dollars from their bank account to yours, you're going to need to enhance your invoicing game.
Structuring Your Invoice
To ensure that your invoice looks as professional as possible, you'll need to structure your invoices properly.
Here's what you'll need:
The Company Logo at the Top
Including the logo not only reminds the customer who's sending the invoice at quick glance, but it also adds legitimacy to the invoice. Businesses that want to be taken seriously have a company logo!
The Sender's Contact Information
This is your company's contact info, but if necessary, you should include a "care of" name should customers need to reach back out to a specific person in the company.
The Client's Contact Information
This is for internal purposes, such as recordkeeping or when multiple employees handle invoices and need to keep them organized.
Date the Invoice Was Sent
This date can verify when the clock starts running for payment.
To keep accurate records, give each invoice a unique number beginning with the very first invoice. If your organization uses any kind of invoice filing automation software, this is vital.
Itemized List of Products Delivered or Services Rendered
Each product or service should have the individual cost, as well as the date the service was rendered or the product was sold.
Total Amount Due
You may want to include this as a summary, such as pre-tax total and post-tax total, as well as any balance forward (if applicable).
This will give the customer information such as your preferred payment method, a time limit for paying the invoice, penalties for late payment on outstanding invoices (more on this later), etc.
A "Thank You" Message Once Your Invoices Have Been Sent
You'd be surprised at how this small detail can increase the likelihood of getting paid! You can include this as an email that comes over with the invoice. Or, if you’re sending the invoice through a third-party platform you can include it on the message the recipient would receive along with theeir invoice
One more tip here: Always spellcheck and review the grammar of your invoices. Programs like Grammarly will make sure you're not putting any misspelled words or poorly structured sentences in your invoice!
Using an Invoice Template vs. Graphic Designer
You can hire a graphic designer to create your ideal template or you can turn to online invoice templates.
The benefit of templates is they already have all of the necessary fields for your information. Applying your company logo is as easy as dropping the picture into the template. Make sure you get templates in a file format your clients can access!
You can find plenty of free or paid templates online. The benefit of paid templates is that they generally give you more options and look more professional. That's not to say you can't find free templates, but keep in mind that many businesses will also be downloading and using those free templates!
Depending on your business, you may want the unique control that comes from a template no one else is using.
Whether you purchase your templates or get them for free, pay attention to the font and layout. Make sure that the design makes sense for your business. You might want to opt for thin, elegant typefaces for upscale merchandise or thick, typewriter-style fonts for a rustic antique shop, for example.
If you do turn to a graphic designer, these decisions can be made easier by a professional with an artistic eye. It will end up costing more, but depending on your business, the cost may be worth it.
Invoicing Management Software
To do invoicing like the big companies do, use invoicing management software. Creating this infrastructure automates the process and removes as much human error as possible.
Effective software automatically receives the invoice, extracts the pertinent information, validates and verifies the info, approves payments (or denies them), and archives the invoices.
Eliminating guesswork helps to keep you from letting customers slip through the cracks. It pays to talk with an invoicing management software provider to find out how they can integrate the software with your existing IT infrastructure.
Invoicing with Quickbooks
If your entire business is already set up to use Quickbooks, then you have a powerful invoicing tool at your fingertips.
In Quickbooks' invoicing menu, under the invoices tab, there is literally a button marked, "Send your first invoice."
Because Quickbooks should already be tied to your customer information database or B2B/B2C data gathering software, you can pull customer names from the dropdown menu.
You can enter your invoice info, preview it, add your logo, and send it off to the customer or client with an invoice email right through Quickbooks.
You will have to go through a sign-up process and fill out an application to be able to accept payments online, however.
Quickbooks also lets you choose from several different templates. Using these templates, invoice numbers will automatically be applied to each invoice.
PayPal and Square Invoices
If you run your business through a payment aggregator such as PayPal or Square, sending invoices is incredibly easy. The benefit is that you don't have to work on setting up an online payment portal of any kind. Payment aggregators take care of that for you!
Keep in mind that you're going to be paying to use these services. They aren't free! PayPal charges 2.9% plus $0.30 for every invoice. But, PayPal also likes to remind their customers that 76% of PayPal invoices are paid on the same day they're sent.
Set Up Recurring Invoices
The name of the game is making invoicing as easy as possible for you and your customers. If you manually send out invoices for regular services or product deliveries, set a calendar reminder.
If you're using software such as Quickbooks or payment aggregators, you can set up recurring invoices that are sent at a specific time period of your choosing.
These recurring invoices ensure you don't forget to send an invoice to a client. If you still need to send a specific invoice at a different time, you can still do that, of course.
Recurring invoices can be sent through the mail as well as through an online invoice or invoice email. Again, you want to avoid the response of, "Well, I just didn't see the invoice!"
Invoicing for Freelancers
Freelancers are in a bit of a unique situation. When you work on your own as a freelancer, technically, it can feel like you're unemployed between every job. Chances are that you probably don't have staff to take care of invoicing for you, either!
You still need a professional company logo, you still need immaculate recordkeeping, and you could still benefit from automation software.
Your entire business is dependent on clients getting your invoices, more so than for, say, the power company, which has thousands (or millions) of customers. These companies know how to reach their customers with invoices and have dedicated staff as well as a massive payment infrastructure to handle payments. You probably don't.
Spend time to set up an invoice system. It doesn't have to be complicated. You can even create a simple one in a Word document. But the rules must be followed if you want to get paid in a timely manner.
Storing Your Invoices Once They Have Been Sent
Small business owners and freelancers will especially need to hear this. Back up your invoices! Invoices are how you prove that customers owe a certain amount of money.
Save invoices on a cloud storage service, on pertinent workstations, and, if need be, on paper with physical filing systems. Having invoices in multiple places keeps your business safe if a customer complains about an item on their invoice or says you never created one for them in the first place.
You also need to be concerned with security. These invoices can contain private financial information for both you and your customers. Having a secure network is vital. If you have physical backups, they need to be behind lock and key. Your entire business could be affected if a hacker finds your financial records and exploits them.
Adjusting for Late Payment
No one wants to be the bad guy. But if you're going to run an effective business, you will need to spell out penalties for late or non-payment.
The general consensus for the business community is that 30 days is plenty of time to give a customer to pay their invoice. This is why you might want to have a "balance forward" section on your invoice.
The "balance forward" shows the customer any outstanding invoice payments that have not been received. You can add the balance forward to the total amount at the bottom of the invoice, as well.
Make sure your templates for invoices let you highlight the balance forward somehow. The total amount will usually be in an obvious place. The way people read documents is to get to the bottom as quickly as possible. On a bill or invoice, this is usually where the eyes will go first.
If you want the customers to notice the balance forward, put it in bold, highlight, and make the box surrounding it a loud color. That way, they can't miss it.
For some best practices on late fee’s read Quickbooks breakdown here.
If your customer doesn't speak your native language, you will need an invoice translator. The translation that communicates intent is something that is difficult to do using the software. In most cases, a human translator is the safest way to go.
If your invoices are simple, you might be able to get away with using Google Translate. For small business owners and freelancers, this will often be your best bet. Large companies that have many international clients will probably need to seek access to translators that can make sure their invoices are readable and clear in other languages.
Invoice Like a Champ with HappyAR
We save companies of all sizes thousands of dollars each year by optimizing the speed and efficiency of their collections methods. No more guessing if someone has received an invoice or trusting that it will be paid on time. This is a fully integrated solution that pays for itself over and over each month by preventing defaults and preserving client relationships.
HappyAR is an ever-evolving toolkit that helps optimize your invoice collections process and our solution starts at $0/month and scales up based on your invoice volume. Visit us at www.happyar.com to learn more.