One of the details of generating profit for your small business is invoicing. If customers don’t receive an invoice, they won’t know they have to pay. A mistake along the process can lead to delays or even non-payment. This creates cash flow problems that have a negative lingering effect on operations.
Here are some of the mistakes in the invoice processing procedure you must avoid.
Forgetting to Send It
The owner and employees of a small business have to do multiple tasks, sometimes simultaneously. In such cases, one of them might forget to send an invoice to a customer. Customers won’t feel obligated to pay, if they don’t see an invoice. Forgetting to send one may cause cash flow problems in the immediate future. Don’t assume anything. Always check if you’ve sent the invoice to a customer.
Lack of Details
You’ll need positive cash flow to improve your business’ working capital. A delay in payment may disrupt this. One of the causes of delays is a lack of details in the invoice. Misspelled names, wrong phone numbers, no or erroneous address, list of items or services paid for, no date, and other important details are missing. Always check the information on the invoice before you send them. It helps to have a template to eliminate mistakes and faster review.
Failure to Follow Up
Your invoice processing procedure should have a follow-up. Failing to do so may lead to missed or delayed payments. Monitor the invoices you send and note their due dates. Make a phone call, send an email or send a letter as the due date nears. You should also contact a customer a day after their due date.
No Signed Contract
A handshake doesn’t guarantee payment. There should be a contract as part of the agreement for the payment of an invoice. Have customers sign a contract so that both parties know about the total amount and due date.
No Itemized List
Details are important whenever you send an invoice. Some businesses fail to include an itemized list when they send invoices to customers. This allows a customer to know the breakdown of what they paid for. Some of the things you can include are the explanation for each fee, costs, hourly rate and other possible fees. The details on the list may vary depending on the industry you’re in.
One of the reasons a customer doesn’t pay is that they might not have gotten the invoice. This is a fault on the small business’ part. They made a mistake when inputting the address. Before you send an invoice, make sure to double-check the address of the recipient.
Your invoice processing procedure will lack continuity and security if there’s no backup. You have the option to have physical copies of the invoices stored in cabinets. You can also create a digital database for all your invoices. A backup in the cloud is more secure and is easier to access and monitor.
Failure to penalize late payments will encourage customers to pay late often. Discourage this behavior by charging customers extra fees when they don’t pay their invoices on time. Penalties improve your collection schedule.
These are some of the mistakes you need to avoid when creating an invoice processing procedure. Avoiding these allows you to collect receivables faster and enables you to maintain good cash flow. We at Robookkeeper can provide you with outsourced accounting services. We can do your bookkeeping for you so that you can focus on growing your company.