Petr is the founder and CEO of Invoice Home, an invoice generating platform designed for small businesses, freelancers and entrepreneurs.
In the world of business, there’s an old saying: “Cash is king.” Businesses must produce revenue to survive, and making sure you receive payments on time and in full is essential. Not only do you need to generate money, you have to be able to collect it.
The first step in ensuring you get paid is creating and sending an invoice to your customer. Invoices are issued by businesses or individuals to request payment for goods or services rendered. They also provide legal records of transactions and can be used for accounting and record-keeping purposes.
Invoices must contain key elements to ensure both the buyer and seller are clear about the costs of goods or services provided. Unfortunately, some businesses distribute invoices that contain incomplete or incorrect details. Failure to provide detailed, accurate invoices can result in payment delays or cause small businesses and freelancers to appear unprofessional.
Studies show “39% of all invoices sent in the U.S. are paid late,” and “61% of late payments are due to incorrect invoices.” Those are compelling reasons to make sure your invoicing process goes well.
To avoid becoming that kind of statistic and to make sure you get paid on time and in full, here are seven things you should include on your invoices.
1. Business Name And Contact Information
Although it may seem obvious, your invoice must have your business’s legal name, address and contact information. It should also include a phone number and email, along with a point of contact, so customers can easily connect with you if they have any questions. Adding a company logo to the invoice reinforces your branding and can create a sense of professionalism.
2. Unique Invoice Number
Using a unique invoice number improves record-keeping and facilitates payment processing. A time-tested approach is to assign unique invoice numbers in sequential order as they are generated. For example, #807 is followed by #808, and so on. Alternatively, you could assign a unique customer identifier and follow that with sequential numbers. If you are doing landscaping work for Bob’s Bikes, you might use BOB07 and follow that with BOB08. Whatever your approach, be sure to remain consistent or you may end up confusing yourself, your customers and your accountant.
3. Customer Information
Including your customer’s address and contact name ensures it is sent to the correct person and company. The customer’s address is often also necessary for legal purposes, ensuring accuracy, compliance and efficient payment processing. Another key piece of information that is occasionally required on an invoice is a purchase order number. Often issued by larger companies with more sophisticated accounting, a purchase order number allows your customer to more easily assign your incoming invoice to the right department for proper expense tracking. Accurate customer information helps prevent any mistakes or confusion that could delay payment processing.
4. Invoice Date/Payment Due Date
One way to get paid on time is to list both the issue and payment due dates on your invoice. Doing so provides reference points for both the buyer and seller by establishing when the transaction took place. Some customers, especially ones at larger businesses, may not process payments for 15, 30 or even 60 days after the invoice is issued. If that’s the case, make sure that your payment due date accurately reflects your customer’s payment timeline, or you could encounter a problem come payment time. At the end of the day, having accurate invoice and payment due dates allows you to keep track of outstanding invoices and follow up with customers that don’t pay on time.
5. Description Of Products/Services
Descriptions of products or services should be clearly stated and itemized. Clients who can quickly understand invoices are more likely to pay in a timely manner. For example, if you rent out large tents for catered parties, don’t just state “tent rental” on your invoices. Make sure you specify the type, size and number of tents you rented and for what occasion. The accountants who pay them need these details to be able to assign the expense to the proper department and line item.
6. Total Amount Due
The total costs of every product or service should be detailed and itemized to include any relevant taxes or fees. Be sure to double check the math to ensure the total costs are accurate. For example, let’s say you’re creating a website for a business. Breaking down the invoice into different line items (e.g., front-end web development, SEO, digital marketing services, etc.) can help your customer visually see and understand the services provided.
7. Payment Terms
Payment terms on the invoice should define acceptable methods (cash, check, credit card or wire) along with instructions as to how payments should be made. Make sure to include applicable late fees to encourage prompt and timely payments. Let’s say you’re a food vendor that has just catered a holiday party for a local bank. This client prefers to pay using an American Express card, but you only accept Visa credit cards for payment. By clearly stating what forms of payment are accepted, you’ll be able to ensure you’re paid in a timely manner without delays or setbacks.
Create accurate invoices every time
Invoices are a critical tool for helping individuals and companies receive payments in a timely and efficient manner. Unfortunately, many business owners send out invoices that contain unclear or inaccurate information, causing confusion and payment delays.
Whether you send hundreds of invoices monthly or just a handful for your small business, the best approach to invoicing is to be detailed, accurate and timely. That way, you set expectations with your customers about how much, when and how to pay you for your hard work.
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