According to research, running a startup or small business can be more stressful than maintaining relationships, personal finances, and even raising children. Whether you’re a solopreneur that wears every hat in the business, or have a part-time business partner, you likely have cash flow top of mind.
Many business owners have so much to do in a day that they don’t prioritize their financial and administrative tasks the way they should. But, the difference between a business that thrives and one that fails is cash flow.
The first step to getting money into your business and being paid accurately and on time is by creating and submitting a proper invoice.
Here are six common invoice mistakes to avoid:
Mistake #1: Not having an invoice template
An invoice is a standard document to request payment for services. Depending on your services, it should include a reference number, name and contact details, dates of services, date of invoice, description of product(s), unit prices of product(s) if relevant, purchase order number, total amount charged, taxes, credit terms and payment terms. This eliminates confusion between the buyer and seller.
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Mistake #2: Not setting payment terms
Payment terms clarify the amount of time the buyer has to pay for services, and they may also include provisions such as if cash is required in advance, or upon delivery. Sometimes, sellers offer a discount if paid before the due date, or add fees if paid after the due date. Clearly defined, easy to understand payment terms will help your cash flow. Keep your payment terms short, e.g., two weeks, and put the exact date on the invoice if you want to get the cash quickly. Terms such as “net 30” or “upon receipt” can be confusing for the general public.
Mistake #3: Not having the appropriate contact person
Your buyer may not be the proper person to list on the invoice as the person of contact. Nine times out of ten it’s your point of contact is someone in the legal or finance department of that business. Make sure you find out who the invoice should be addressed to before sending it out.
Mistake #4: Not backing up the original file
Forgetting to back up the original file is another common mistake. This mistake may be a surprise, but many people send off an invoice without thinking to save it – either to the cloud or an external drive. Keep an extra copy saved in case your computer crashes or your business is impacted by a natural disaster… you never know when you may be audited or have to make changes to it.
Mistake #5: Leaving out essential details on your invoice or making mistakes
Leaving out critical details during the initial send to your customer could delay payment. Make sure your invoice includes all of the pertinent details listed in #1 above. The invoice template will help you with this.
Check the invoice several times before you send it. Ensure the dates are correct, the services rendered are there, and there are no spelling mistakes. All of these are very costly mistakes.
Mistake #6: Not setting a due date
According to a Wall Street Journal survey, 64 percent of small businesses have unpaid invoices more than 60 days old and 20 percent say the problem is worsening. Setting a due date and having clear payment terms will ensure that your unpaid invoices are resolved on time.
Avoid these common mistakes and download one of our three free invoice templates.
Our free invoice templates are designed to impress your clients, clearly communicate your payment terms and – most importantly – make sure you get paid on time.